Activity in London’s £5 million-plus market foregrounded by Budget concerns
The London housing market at £5 million-plus maintained a level of resilience in Q3 2024, seeing sales volumes and total value transacted exceed the equivalent quarters for the 3 years preceding the Covid-19 pandemic. This, in spite of a continued atmosphere of caution over the past 3 months as July’s General Election gave way to prolonged speculation about October’s Budget, and particularly its potential impact on high net worth individuals.
In total, there were 102 second-hand and new build sales at £5 million and above across London in Q3 2024, equating to a total value of £1.06 billion. These volumes are 52% up on the pre-pandemic average (2017-2019) for Q3 and an 11% increase on the number of sales achieved in Q1 of this year. However, this still represents a decrease of -15% on Q2 2024 and a greater fall of -34% compared with Q3 2023.
And while volumes across the more discretionary £10 million-plus market are also down by -10% on Q2 2024 and -35% on Q3 2023, they were still 46% above the first quarter of the year and 75% higher than the pre-Covid average. These substantial percentage changes can in part be explained by the relatively low number of sales above this price threshold.
As was the case in the lead-up to the election, a proportion of buyers have continued to assess their position in anticipation of Autumn’s milestone Budget. Shortly after winning power, the new government indicated that the fiscal event would seek to target ‘those with the broadest shoulders’ in an attempt to plug the ‘black hole’ in public finances. Rumoured initiatives included an overhaul of the ‘non-doms’ tax regime, as well as adjustments to capital gains and inheritance tax.
However in August, the Bank of England actioned the first rate cut since the onset of the pandemic, stimulating further competition in the mortgage market, which in turn supported activity among debt-reliant buyers. Indeed, predominantly domestic buyers who purchase through mortgages are still represented at £5 million-plus and above.
What are the trends behind the data
Between Q1 and Q3 2024, Kensington saw the highest proportion of £5 million-plus of sales, accounting for 14% of transactions at this price point. This was followed by Belgravia at 13% and Mayfair at 12%, the former continuing to benefit from local residential and commercial investment. Isolating Q3 alone Mayfair saw the highest proportion at 15%.
In line with the boost to domestic buyers from better mortgage rates, house sales continue to outweigh flat sales between Q1 and Q3 2024, accounting for 64% of all £5 million-plus sales. This was the second highest proportion for this three quarter period after 2021 (76% houses) and was last achieved ten years ago in 2014 (also 64% houses). The top three areas for house transactions in Q3 alone also point towards a preference for spacious, family homes with access to private green space: St John’s Wood (18%), Kensington (15%) and Chelsea (14%).
Outlook
Some vendors following the Budget will have breathed a sigh of relief at the Chancellor’s announcement that capital gains rates for residential property will remain unchanged, alongside a freezing of inheritance tax rates until 2030. Less welcome were the surprise additional 2% surcharge on the higher rate of SDLT for second homes, as well as confirmation that the ‘non-doms’ status would be abolished (despite some earlier signals to the contrary). Those seeking to purchase a second home in the capital, or who have been used to paying tax only on offshore revenue remitted to the UK, may pause to reconsider their position, if they have not done so already. Many will choose to retain a base in London.
Meanwhile, mortgage-reliant buyers will continue to benefit from further interest rate cuts, although the OBR now forecasts these to occur at a slower rate, due to certain changes made in the Budget. Nevertheless, at the top of the market, London will continue to retain its appeal as an international hub for commerce, culture and education, in what is expected to remain a price sensitive market.