By Adam Jennings, Head of Residential at Chestertons
Prime Minister Andy Burnham has promised major housing reform, from increased council housebuilding to potentially replacing stamp duty and council tax with an annual property levy.
There is a strong case for reform. Stamp duty discourages people from moving and council tax is based on property values that are 35 years out of date.
But London cannot simply be treated as a convenient source of property wealth.
High property values do not necessarily mean homeowners have high disposable incomes, while further costs for landlords risk accelerating the loss of urgently needed rental homes.
Abolishing stamp duty could unlock transactions, which would theoretically boost the market. The challenge is that replacing it with an annual tax could impose fresh pressure on ownership and investment within the capital.
The current sales market is challenging, but the underlying picture is more complicated than buyers adopting a ‘wait and see’ approach.
Across Chestertons’ network of more than 35 London branches, we are seeing considerable variation between individual streets and neighbourhoods - making evidence-based pricing and genuinely local knowledge increasingly important.
Chestertons’ latest figures show a 20% year-on-year decline in sales enquiries and a 24% fall in new instructions.
However, offers and exchanges both increased by 11%, largely reflecting committed buyers who began their searches during stronger post-Budget demand earlier in the year.
Buyers in the capital may also be encouraged to learn that average house prices in London have fallen from 11.6 times average earnings to 8.7 times. Yet despite this, London remains the least affordable region in England.
The Bank of England has held the Base Rate at 3.75% for four months, despite earlier hopes of a spring cut.
Geopolitical instability has kept government borrowing costs - and consequently mortgage rates- higher, while uncertainty over the new Government’s economic and property policies has given buyers and sellers another reason to wait.
That uncertainty could continue. Burnham has promised a ten-year programme for government, but its full detail is not expected until later this year, according to Reuters.
Meanwhile the market is being asked to respond to ambitious proposals without knowing how they will be funded, sequenced or implemented.
The quicker we get clarity on any positive property reforms, the more reassured buyers and sellers will be.
Burnham’s support for abolishing stamp duty could provide a significant boost to transactions, particularly in the capital.
The tax falls due when buyers are already finding a deposit and paying legal, mortgage, removal and renovation costs. It discourages older homeowners from downsizing, prevents families moving into more suitable properties and makes relocating for employment more expensive.
Londoners feel this particularly strongly because the tax rises with purchase price.
Over the decade to September 2025, London buyers reportedly paid approximately £25 billion in residential stamp duty - more than the North and Midlands combined.
That does not mean London buyers should receive special treatment. But, with the average London home costing approximately £553,000 in April 2026, stamp duty inevitably hits buyers in the capital harder.
Research by economists Michael Best and Henrik Kleven, cited by the Institute for Fiscal Studies, suggests that removing a transaction tax of just 1% could increase housing transactions by as much as 10%.
Chestertons’ 24% annual fall in new instructions matters here. The market does not simply need more buyers. It needs more owners to feel that moving is financially worthwhile.
Abolishing stamp duty would not make mortgages cheaper, but it would remove one substantial barrier over which the Government has direct control.
The timing must be decisive. In this environment, buyers and sellers need clear, practical guidance based on current local demand - not further ambiguity from Westminster.
Announcing its abolition without implementing it immediately could temporarily freeze the market.
The difficult question is what would replace the lost revenue.
Burnham has previously supported replacing stamp duty and council tax with an annual charge based on current property values.
He is reported to favour a model similar to that promoted by the Fairer Share campaign, under which owners would pay approximately 0.48% of their property’s value each year. The rate could rise to 0.96% for second homes, empty properties and certain other categories.
There is a legitimate argument for reforming council tax. Homes in England are still placed into eight bands using estimated 1991 values. The highest band is charged only three times as much as the lowest, even though the property may now be worth far more. (The official bands are explained by the Valuation Office Agency).
At 0.48%, a £500,000 home would attract an annual bill of £2,400. A £1 million property would cost £4,800 every year. For additional properties charged at 0.96%, those figures would double.
London has many homeowners whose properties have risen substantially in value. They may be wealthy on paper, but that does not mean they have the cash flow to meet a significantly higher annual bill.
For someone moving frequently, the stamp duty saving could outweigh the new cost. For a long-standing homeowner it could become a substantial lifetime liability.
Any reform would need transitional protection, deferral for low-income homeowners and clear rules for people who recently paid large stamp duty bills. Without them, the Government would be retrospectively penalising people who bought under one tax system (stamp duty) before moving them into another.
Ministers must also clarify whether they are considering a tax on the total property value or specifically on the underlying land. Those are different policies with different consequences, yet they are frequently discussed interchangeably.
The proposed treatment of landlords could be cause for concern.
London relies more heavily on private renting than any other English region. In 2024–25, 28% of London households rented privately, compared with 17% across the rest of England, according to the English Housing Survey.
If rental properties face a higher annual tax, landlords will have to decide whether their investment remains viable. Some may accept lower returns, and some may seek higher rents, but others will sell.
This comes as landlords are already adjusting to the Renters’ Rights Act. Chestertons’ data shows that in May, its first month, the number of landlords reducing asking rents fell by 36% year on year.
Many appear to have allowed themselves more flexibility in their initial pricing because the legislation prevents them from accepting offers above the advertised rent. Some properties subsequently remained vacant, contributing to a 6% annual increase in rent reductions in June.
This is what happens when policy is designed around its intended outcome without sufficient consideration of market behaviour.
An annual tax would not necessarily be passed directly to tenants; rents are ultimately limited by what tenants can afford.
But if the cost causes more landlords to sell, the result will be fewer rental homes. In a city where demand already outstrips supply, that will place further pressure on rents.
Responsible landlords are part of London’s housing infrastructure. Treating them simply as a source of additional tax revenue will not make renting cheaper.
More council housing should reduce pressure at the lower end of London’s rental market, and Burnham is surely right to recognise the shortage.
But it is a long-term supply policy, not an immediate substitute for existing privately rented homes. Council developments take years to fund, plan and build; a rental property can leave the market within months.
The new Government must support additional council building without presenting private landlords and developers as the problem. London needs housing of every tenure, and policies that reduce one form of supply before another is ready will make the shortage worse.
Most analysts agree, Britain’s property taxes urgently need reform. Stamp duty obstructs transactions, while council tax no longer reflects the geography or value of today’s housing market.
But London should not be punished simply because its homes are more expensive. The capital already combines the country’s highest property values with its worst affordability and greatest dependence on private renting.
Burnham would do well to abolish stamp duty, but he must not replace it with a permanent tax that traps income-poor homeowners, deters investment and pushes responsible landlords out.
The test is not whether the policy looks more equal on a Treasury spreadsheet. It is whether more Londoners can move, buy and rent a home once it is introduced.