Changes to the tax treatment of UK resident non-domiciled individuals (non-doms) that come into force in April 2025 will lead to an increased supply of properties in prime central London, according to research by Savills.
A shift towards renting, additional stamp duty land tax (SDLT) charges for second home buyers and investors, and the perception of London as a home for wealth will also contribute to reduced demand for prime property in London, Savills’ article ‘Prime House Price Forecasts’ shows.
“We anticipate that the abolition of ‘non-doms’ status and the additional 2% stamp duty surcharge will result in further downward pressure on prices in the short-term,” said the report, which considers the housing market in London.
Lucian Cook, head of residential research at Savills, writing in December 2024, said: “The cautious mentality that we observed ahead of this summer’s General Election and the Autumn Budget has persisted across prime markets as the year draws to a close, although properties continue to sell where they are priced competitively.
Generally, needs-based buyers have underpinned market activity post-Budget, as they have benefited from relatively stable mortgage rates and the prospect of further base rate cuts in 2025. As a result, these sub-markets have been the strongest performers in London.However, prime central London locations remain the most price sensitive, as buyers and sellers adjust to the winding down of the ‘non-doms’ tax regime and the new Stamp Duty surcharge for second home purchases.
We expect market conditions to remain challenging in central London next year as the impact of these changes continues to be felt.”
Despite the expected drop over the next 12 months, Savills expects prime property prices in London to rally in 2026 and continue to increase in subsequent years.
In its report, the real estate agency predicts that prices will rise by 1% in 2026, 3.5% in 2027, 5% in 2028 and 4% in 2029, resulting in an overall increase of 9.6% over the next five years to September 2029.
“The scale of falls will be limited by where prices already sit in an historic context, cuts to the Bank of England base rate and ongoing safe-haven flows of wealth, given underlying geopolitical uncertainty” said Savills.
“We also anticipate that the risk of a flood of stock hitting the market will be limited by the desire of those becoming non-UK resident to retain a base in London.”
The prime central London market largely covers high-value real estate in Knightsbridge, Belgravia, the City of Westminster, the Royal Borough of Kensington and Chelsea, parts of the boroughs of Hammersmith and Fulham and Camden.
Last year, house prices in Knightsbridge and Belgravia fell by 2% and 1.5%, respectively, while prices fell 0.8 per cent across the capital as a whole.
Prices in prime central London saw a growth of 0.7% in the five years to September 2024.
Read our previous article about the prime London property market published in July 2024 here.
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This blog was prepared on 2 January 2025. It is not intended to be advice and should not be relied upon as such.