The rate of house price growth in the UK slowed in February, as a wave of homes entering the market signalled a stronger buyers' market. However, London is facing a notable dip in demand, with a "stamp duty hangover" setting in as prospective home buyers hit pause ahead of upcoming tax changes.

According to Zoopla, the annual rate of house price growth in the UK dropped to 1.8% in February, down slightly from 1.9% in January. The average price of a home across the UK now stands at £267,500.

One major factor driving this shift is the significant increase in the supply of homes for sale. From 1 April, an estimated 150 councils across the UK are set to double council tax on second homes, a policy that is expected to further increase the number of properties on the market, especially in regions popular with second-home buyers.

Areas such as the South West of England, which includes hotspots like Truro in Cornwall and Torquay in Devon, have already seen house prices dip in response.

At the same time, prices are rising sharply in parts of northern England and Scotland. According to Zoopla, areas like Motherwell and Kirkcaldy in Scotland, and Wigan, Blackburn, Lancaster, and Bradford in northern England, are seeing rapid price growth.

The average prices in these locations range from £130,000 to £220,000, which is below the UK’s national average.

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“In northern England, the Midlands and Scotland, buyer demand is 10% (plus) higher than a year ago, while the supply of homes for sale has grown more slowly. This is supporting above-average house price inflation,” Zoopla said.

Nationwide, there are now 11% more homes for sale than this time last year, with sales agreed up by 5%, strengthening the buyers' market. Estate agents currently have an average of 33 homes for sale, compared to 29 this time last year.

As the market enters the spring selling season, which accounts for nearly 30% of annual listings, the number of homes available is expected to rise even further, providing buyers with more options.

However, the London market is facing a unique challenge. Zoopla has pointed to what it describes as a "stamp duty hangover," with demand from home buyers falling back ahead of significant changes to the stamp duty regime.

From April, the "nil-rate" stamp duty threshold for first-time buyers will drop from £425,000 to £300,000, meaning that around 80% of first-time buyers in London will soon be liable for the tax, compared to less than half under current thresholds.

“This has created a lull in market activity, with demand 3% lower over the last year," Zoopla said in its report. "The impact is more pronounced amongst first-time buyers, hitting price rises in the capital.”

Many first-time buyers appear to have brought forward their purchasing decisions late last year in a bid to avoid the higher stamp duty rates set to take effect from 1 April, creating a temporary dip in demand as the deadline looms.

Richard Donnell, executive director at Zoopla, said: “House price growth is set to moderate further as supply grows and the extra costs of stamp duty in England feed through into house prices.

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“A slowing in house price growth is not a major concern, although the market needs some growth in prices to encourage sellers to come to market and buyers to make realistic offers on homes for sale.

“There is plenty of demand for homes but also lots of choice.

“Households looking to sell their home in 2025 need to be careful when setting their asking prices if they are to attract sufficient demand to agree a sale.

“It’s important to seek the advice of local estate agents to inform the most suitable pricing strategy for every home.”

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