The vast majority of homes in London are losing value, prompting calls for John Healey to cut stamp duty at the Budget later this week.  

Across the capital and the south east of England, 85 per cent of homes have fallen in the last year, according to property portal Zoopla, compared to 35 per cent in the UK as a whole. 

London’s property market has borne the brunt of rising mortgage costs and falling demand for homes since the Iran war, as housebuilders urge the government to boost affordability. 

The average home in the capital is worth £5,400 less than it was a year ago, according to Zoopla, while house prices in the north west are £6,600 higher. 

Londoners are bearing the brunt from stamp duty because house prices are so much higher in the capital. Prospective homeowners are forced to lower their asking prices because buyers cannot afford the tax, according to Zoopla.

The homes portal said extending the two per cent stamp duty band would save home movers up to £7,500, while similar action for first-time buyers could save up to £6,000 in every transaction. 

Top housebuilders, including Berkeley, Bellway and Barratt Redrow, have urged the government to abolish stamp duty altogether for first-time buyers in order to stimulate the housing market. 

Last month, Andy Burnham revived George Osborne’s Help to Buy scheme, which offers equity loans to help first-time buyers afford a deposit. Housebuilders welcomed this programme but property experts voiced fears that it would not be enough. 

Housing market ‘becoming localised’

Mortgage rates have soared since the Iran war broke out in February. The resulting weight on demand has combined with rising build costs to make construction increasingly unviable, housebuilders say.

Tom Bill, head of UK residential research at Knight Frank, said: “Buyers’ budgets are being squeezed as the Middle East conflict sends borrowing costs higher, but the overall number of mortgage approvals has also fallen, which has weakened demand further. 

“Price growth has effectively ground to a halt this year and we expect the downward pressure to continue in the final months of the year, which may be aggravated by this week’s Budget.”

Nathan Emerson, chief executive of estate agency trade body Propertymark, said the UK’s housing market is becoming “increasingly localised,” making it harder for the government to intervene.

He said: “Despite regional price falls, demand remains, but buyers are increasingly selective and focused on value. 

“Ultimately, market confidence will depend on improved affordability, access to suitable housing and the ability of buyers and sellers to move with confidence.”