House prices in the South of England have fallen for the first time since Labour took power as the Budget hits the property market.

Prices fell year-on-year in November across London, the South East and the South West of England, according to Zoopla. It marks the first fall across this region in 18 months.

Prospective homebuyers have been spooked for several weeks by rumours that the Chancellor’s Budget would introduce more taxes for homes worth more than £500,000.

In the event, Rachel Reeves opted for a narrower tax on properties worth £2m or more. However, the speculation in the run-up to Wednesday’s statement proved damaging to areas of the country where property prices are highest.

Prices in London and the South East edged down by 0.1pc in the four weeks to Nov 23, while those in the South West of England declined by 0.2pc.

Buyer interest slumped by 12pc decline in buyer demand across Britain during the four-week period, researchers said. Fewer house sales were agreed, with the number falling by 4pc year-on-year.

Richard Donnell, the executive director at Zoopla, said: “Home buyers and sellers will welcome the end of the uncertainty that has stalled housing market activity since the late summer.

“With greater certainty, we expect a rebound in housing market activity that builds into the new year, with households who paused home moving decisions over recent months returning with greater confidence.

“The removal of the threat of a new annual property tax from 210,000 homes [worth over £500,000] is particularly positive for the market and will help revive activity in higher-value areas across southern England where house prices are under pressure.”

House prices were more resilient beyond the South of England, with the average across the UK climbing by 1.3pc year-on-year to £270,200.

The South is expected to bear the brunt of the Chancellor’s new tax surcharge on homes worth more than £2m set to take effect in April 2028.

Owners of affected homes will need to pay an annual council tax surcharge on top of their usual council tax payments.

This surcharge will apply to four price bands, starting from £2,500 a year for homes valued between £2m to 2.5m, rising to £7,500 per year for those in the top band of £5m and above.

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It is expected to hit more than 140,000 homes, disproportionately affecting homeowners in London and the South East, where 82pc of recent sales of homes worth more than £2m were.

David Powell, the chief executive of Andrews, an estate agency, said: “There will be much disappointment around the £2m-plus mansion tax and it’s likely the South will get hit the hardest.”

However, Tom Bill, the head of UK residential research at Knight Frank, added: “There are still questions around the mansion tax. Until it is introduced in 2028, buyers and sellers face uncertainty around price thresholds and even once valuations are completed, they could be challenged, which would prolong the limbo.”

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