Investor appetite for residential property has fallen sharply, with new data showing that the number of buyers seeking additional homes has dropped to its lowest level since the height of the pandemic.
According to new analysis from Hamptons, recent stamp duty increases and council tax changes are driving the slowdown, prompting would-be landlords and second-home buyers to retreat from the market.
While overall buyer demand reached a four-year high in May, the recovery is being led by first-time buyers, whose numbers grew 4% year-on-year. In contrast, the number of applicants looking to purchase an additional home plunged 18% compared with May 2024.
This marks the weakest demand for extra homes since May 2020, during the first wave of Covid-19 restrictions. Hamptons said the shift reflects growing caution among investors, as higher upfront costs and tighter tax rules reduce the appeal of residential property as an investment vehicle.
The broader picture, however, tells a more nuanced story. Overall demand was 3% higher than the same time last year, reversing a 10% decline in April. The change suggests that falling mortgage rates, alongside eased stress testing by lenders, are beginning to boost buyer confidence, especially among those with smaller deposits.
Hamptons found that buyer demand increased most in the North West, up 9% year-on-year, followed by the West Midlands (+7%) and London (+4%). The North East was the only region to see demand fall, down 6%.
Property prices appear to be holding steady in this more active market. In May, the average home in England and Wales sold for 99% of its final asking price, up slightly from 98.8% a year earlier. Only 12.8% of homes sold for more than 5% below asking, the lowest level since September 2022, while just 3% of buyers secured discounts of more than 10%.
The exception is the £1 million-plus market, which remains notably more cautious. Here, 32% of homes sold in May went for over 5% below asking price—the highest May proportion since 2020. Sellers in this segment appear increasingly hesitant, preferring to hold out for better conditions rather than accept lower offers.
By contrast, homes priced between £500,000 and £1 million, typically favoured by upsizers, are seeing fewer discounts. In the East of England, just 9% of buyers managed to negotiate a 5% discount in May, down from 13% a year earlier. In the North East, however, 19% of buyers were still able to do so.
Despite the uptick in demand, the supply of homes remains high. There were 4% more homes on the market in May than a year ago, and 41% more than in May 2019. Homes are also taking longer to sell: the average property that went under offer in May had been on the market for 54 days, up from 48 days last year. Only 31% of homes sold within 30 days—the lowest May figure since the pandemic.
The slowdown is particularly acute in the prime market, where homes priced over £1m saw the biggest increase in time on the market. These properties were typically listed for 56 days before finding a buyer—11 days longer than in May 2024.
Interestingly, London is now outperforming the national average for time to sale, with 32% of homes in the capital going under offer within a month. This reversal of the trend seen between 2016 and 2024 is largely due to stronger demand in more affordable outer boroughs, rather than a recovery in prime central London, where sellers remain reluctant to take losses.
Scotland continues to be the fastest-moving market, with 54% of homes selling within 30 days and the average home going under offer in just 28 days—nearly half the national average.
Commenting on the findings, Aneisha Beveridge, head of research at Hamptons, said the post-stamp duty lull had proven short-lived, with buyer demand bouncing back as mortgage affordability improves.
“Falling mortgage rates have significantly boosted buyers’ purchasing power, in most cases offsetting the increase in stamp duty bills they now face. First-time buyers have been the most significant beneficiaries, with high loan-to-value mortgage rates seeing the most substantial falls,” Beveridge said.
However, she cautioned that prime markets remain subdued, with sellers more likely to delay listing their properties unless they are confident of achieving a premium price.
“These typically discretionary sellers are willing to wait for prices to recover and are less prepared to sell at any cost. As a result, only 27% of homes purchased for over £1m a decade ago have since been sold, compared to 40% of all homes across the country,” she added.
With summer underway and signs of stabilisation returning, the next major test for the housing market will come in the autumn Budget, which may bring further tax reforms. For now, buyers appear cautiously optimistic, even as investors and second-home purchasers remain on the sidelines.
