A capital market losing its shine
The London property market, particularly at the luxury end, is showing clear signs of strain. Sales of £5 million-plus homes have slipped by almost a fifth over the summer, according to new figures from Savills. It’s a notable cooling for what was once one of the most resilient corners of the housing market.
Even the capital’s wealthiest buyers are pausing for breath. Uncertainty surrounding the upcoming UK budget and talk of a potential mansion tax have taken the gloss off prime property deals, with many choosing to wait and see what Chancellor Rachel Reeves announces next month.
Speculation weighs on the top end
The biggest concern for buyers and sellers alike lies in what could come next. Reports suggest that the government is considering major property tax changes, including a possible mansion tax on homes worth over £1.5 million and replacing stamp duty with an annual property levy.
That prospect has caused nervousness among investors, particularly overseas buyers who already felt the impact of the end of the non-dom tax regime in April. As Frances McDonald, a research analyst at Savills, explained, “The very top end of the market is feeling the biggest impact.”
Between July and September, only 93 properties worth £5 million or more changed hands across the city, a fall of almost 20% on the same period last year.
Savills report shows shifting buyer behaviour
Savills’ latest report highlights that prime London property prices have dropped 21% since their 2014 peak. While that’s a hefty decline, it has also attracted what the firm describes as “opportunistic” domestic buyers, those looking beyond traditional luxury postcodes such as Kensington, Belgravia, and Chelsea.
Areas like Bayswater and Marylebone are increasingly drawing attention, as buyers hope to secure prime locations at relatively softer prices. Richard Gutteridge, co-head of prime central London at Savills, noted that this shift signals “growing interest in areas typically less synonymous with high-end international investors.”
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Foxtons warns of a ‘wait-and-see’ market
Estate agents are also feeling the chill. Foxtons, one of London’s largest agencies, has warned that the delay to the autumn budget has prompted a “wait-and-see attitude” among high-value buyers. The company expects its annual profits to fall short of earlier forecasts, citing slower sales activity since the end of summer.
Chief executive Guy Gittins said: “There remains significant pent-up demand in the London volume market and we believe market conditions will improve once there is better clarity following the budget.”
Despite that optimism, Foxtons’ shares have dipped by almost a fifth this year, underlining how even established agents are not immune to wider market uncertainty.
Luxury slowdown, broader lessons
While the headlines focus on multi-million-pound mansions and penthouses, the implications extend beyond the ultra-wealthy. A cooling luxury market often signals shifting sentiment more broadly, particularly in areas where property values are interlinked through comparable sales.
Buyers and sellers at every level may see changes in valuation trends, and landlords with higher-value assets could find renewed scrutiny around property taxes or reporting obligations in the months ahead.
For now, most observers agree that London’s luxury property market is in a holding pattern. As Savills’ McDonald summed it up, “The existing pool of buyers will be biding their time to see what the upcoming budget brings.”
Where to watch next
With so much depending on fiscal policy, the next few months will be crucial. If the budget introduces changes to property taxation, London could see either a short-term rush to complete deals or a longer period of cautious inactivity. For official updates, see the UK Government Budget Announcement.
Either way, the Savills report and Foxtons London trading update both underline one point clearly: confidence, not cash, is what’s currently in short supply across the capital’s high-end housing market.
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