Following the chancellor’s inaugural Budget, purchasers in prime central London continue to exercise caution; however, most outer prime buyers are still benefitting from a stable mortgage market, despite underlying economic headwinds.
Nick Maud, Director, Residential Research
In late October, buyers across prime London followed Rachel Reeves’ first Budget with intense scrutiny, as a year marked by political and fiscal change drew to a close. The long-trailed winding-down of the ‘non-doms’ tax status was confirmed, alongside a Stamp Duty Land Tax (SDLT) surcharge on the purchase of second homes. These two policy announcements were primary in maintaining a cautious outlook for buyers in prime central London in particular. Unsurprisingly, prices came under further pressure at the tail-end of 2024, though a -0.8% fall in prices in the final quarter meant price adjustments were contained to -1.9% over the course of 2025 as a whole.
More established prime central London locations, where concentrations of wealth are more prevalent and the international buyer base is greater, proved most price sensitive. For example, prices in Knightsbridge (-2.0%), South Kensington (-1.6%) and Belgravia (-1.5%) saw the greatest quarterly price falls. Prices in prime central London ended the year down -20.7% compared to the peak of the market in 2014 (ranging from -9.6% in Bayswater to -26.3% in Earls Court). This is likely to limit the extent of further price adjustments in 2025 when this market is expected to present an attractive value proposition for those attracted to its unique appeal in a global context.
Across prime outer London markets, mortgage-reliant buyers with more needs-based motivations continue to benefit from a relatively stable lending market than in the previous year, supported by two base rate cuts in 2024. The result has been the second consecutive quarter of annual growth in 2024 (1.4%), as well as consistently positive quarterly growth throughout the year, culminating in a +0.3% rise in Q4.
Indeed, 67% of respondents to our latest agents’ survey listed first time buyers and upsizers as the primary drivers of demand across prime London. This has encouraged modest growth in certain submarkets, most notably in those that are still maturing into ‘true’ prime locations, such as Hackney, which experienced 1.7% quarterly growth and Shoreditch, which saw 1.4% quarterly growth.
According to data from TwentyCi, agreed sales (net of fall throughs) at £2 million and above in the second half of 2024 were largely higher than their more subdued monthly positions in 2023. Overall, net sales in Q4 2024 were 24% higher than in the final quarter of 2023. Increases on the previous year were particularly notable in July (25%), following a more subdued period of activity in the month of June (2%), as buyers adopted a ‘wait-and-see’ approach ahead of the election. A similar phenomenon can be observed in October (48%), as buyers and sellers sought to exchange ahead of any policy announcements made at the end of the month. While there was diminished annual activity in August (-8%) and November (1%) as markets reacted to two major political events, a further surge was observed in December (33%), as buyer commitment improved towards the year-end.
Monthly instruction levels were more consistent with the previous year, with Q4 2024 a modest -1% below the same quarter in 2023. In the intervening period between the general election and the Budget, instructions trended downwards relative to the previous year, declining from 9% in September to -4%. Despite the relatively increased sales activity over the final month, vendors continue to demonstrate some caution as they assess their position in the new fiscal environment. Nevertheless, in our latest agents’ survey, a majority expected a slight increase in stock over the coming quarter.
As we look forward to the coming year, we anticipate downward pressure on pricing across prime central London markets in the immediate term, as the impact of key Budget announcements is felt and more readily feeds into buyer and seller price expectations. Once again, the key policies include the rolling back of the ‘non-doms’ status and the additional SDLT surcharge on second homes, the cumulative effect of which is expected to result in a fall of -4% in 2025. However, the capital retains an appeal as a cultural and economic hub and we expect stock levels to remain relatively stable and for many ‘non-doms’ to retain some kind of base in London. Ultimately, improvements to both the UK and worldwide economy will drive future recovery, with tax policy keeping price growth relatively restrained at 9.6% over the next 5 years.
Prices across outer prime London are expected to remain flat for 2025, demonstrating more resilience than prime central London. These markets tend to be more reliant on debt purchases and the prospect of further base rate cuts in 2025 will stimulate some activity among those buying with a mortgage, albeit tempered by pressure on some household finances due to the imposition of VAT on private school fees. The absence of an immediate trickle-down recovery from prime central London is also expected to contribute to these markets slightly underperforming mainstream London over the next 5 years, albeit delivering forecast growth of 14.7% over that period.
< View our latest Q4 2024 updates here.
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