London house prices hit lowest in nearly two years as Budget tax fears bite

London's residential property market has slipped to its weakest position in nearly two years as buyer activity cools ahead of a widely anticipated Budget that could introduce new levies on high-value homes. The decline in prices reflects growing caution among purchasers and investors, who are factoring in potential tax increases that would hit the upper end of the market.

Property agents and market analysts say the fall is broad-based, affecting both prime central areas and more mainstream commuter belts. Sellers in recent weeks have been increasingly receptive to lower offers, and listings have remained on the market longer than typical seasonal patterns. The market reaction appears to be driven largely by uncertainty over the Chancellor's plans, with prospective buyers delaying decisions until the Budget sets out any changes to stamp duty, annual property taxes or wealth measures aimed at high-value properties.

The anticipated tax measures - which have been described in some reports as a raid on high-value properties - have injected fresh volatility into a market already grappling with higher borrowing costs and subdued wage growth. Lenders have tightened mortgage criteria in response to economic uncertainty, limiting borrowing capacity for some households and further dampening demand.

Economists caution that a sustained fall in London prices could have broader repercussions for consumer confidence and local economic activity, given the city's outsized role in the UK economy. A correction concentrated at the top end would also affect owner-occupiers who trade up and the market for new-build luxury apartments.

Industry participants say much will depend on the specifics announced in the Budget - including thresholds, reliefs and the timing of any new taxes - and on whether the measures are framed as short-term fiscal adjustments or longer-term structural changes. If changes are confined to a narrow band of ultra-high-value homes, the broader market could stabilise. Conversely, more sweeping measures could prolong price pressure and reshape buyer behaviour for months.

For now, the latest price data underline a market in cautious retreat rather than collapse. Buyers and sellers are watching closely for policy detail that will determine whether prices dip further or begin to recover once tax uncertainty is resolved.