UK tax hikes are thinning out the ranks of super-wealthy homebuyers
By Damian Shepherd
When two Chinese investors bought a majority stake in a development dubbed “Mayfair’s most exclusive address” in 2015, London’s housing market was booming. Almost 10 years and an insolvency later, half the apartments have yet to be sold.
The travails of 60 Curzon are emblematic of what’s been a miserable period for the city’s prime property market, with prices down more than 20% from their peak. The downtrend is now being supercharged by the recent removal of a tax perk for so-called non-doms and an exodus of wealthy. For realtors, that’s further thinning out the rolodexes of deep-pocketed clients on whom the luxury market has long depended.
Quite simply, the market looks to be in a chronic decline, with no recovery in sight. Sellers are slashing prices, deals are taking longer — if they happen at all — and some luxury complexes are part empty. Just this month, Sotheby’s dropped the price of a Mayfair penthouse to £68 million ($91 million) from £85 million. It had originally been put on the market for about £100 million.
“London isn’t as sought after as it was a decade ago,” said Aneisha Beveridge, head of research at broker Hamptons.
Broker Savills Plc expects prices for prime central London properties to fall about 4% this year. At Black Brick Property Solutions in Mayfair, managing partner Camilla Dell predicts an even steeper drop and is picking up other signs of financial trouble.
“I can see the prime central London market ending up 8% to 10% lower by the end of this year,” she said. “I am starting to see an increase in receivership deals come across my desk.”
The latest numbers seem to support such pessimism. Deals for properties valued at £5 million or more have fallen about 15% in the past year, researcher LonRes said last week. The result is a growing glut of homes that aren’t selling, meaning it’s going to take even more severe price cuts to get buyers interested.
Price Cuts for £5 Million-Plus London Homes Are On the Rise
The damage was set in train by a slew of tax hikes targeting both luxury real estate and the city’s wealthy elite, and has been compounded by blows from Brexit to higher interest rates and sanctions on Russian money.
This year, the Labour government ended a long-standing tax regime that benefited rich non-domiciled residents. After that sparked a wave of departures, the Financial Times reported that the government is considering reversing a decision on inheritance tax.
Read more: Britain Counts the Mounting Cost of Taxing Wealthy ‘Non-Doms’
The downward drift for high-end homes echoes the fortunes of London itself, particularly after the UK’s vote to leave the EU raised questions about the city’s place in the world and its desirability as a location for business and money.
Even if some of the most pessimistic Brexit predictions have proved off the mark, there are multiple examples of how much luxury property has been ground down in recent years, and how much harder it’s become to sell the priciest homes.
60 Curzon, which was later financed by funds managed by Apollo Global Management Inc., isn’t the only site with properties sitting empty. The Bryanston, a luxury residential tower overlooking Hyde Park, has only filled about half of its 54 units since they went on sale roughly four years ago.
“Long gone are the glory days,” said Paul Finch, head of new homes at broker Beauchamp Estates. “Margins have become extremely tight and the gap between commercial success or loss has become very narrow.”
Mega Mansion
In the first half of the 2010s, capital was flooding into London’s red-hot residential property as interest rates were slashed in the aftermath of the global financial crisis.
One moment capturing the boom was speculation in 2015 about the owner of ‘Witanhurst,’ the city’s largest private home, which newspapers estimated had a value of £300 million.
But just as readers were pouring over the details of the mega mansion and marveling at the torrent of wealth flowing into the UK capital, the market was quietly turning a corner.
London Luxury Property Isn’t As In Demand As It Once Was
First, then-Chancellor of the Exchequer George Osborne rewrote property tax rules in late 2014, effectively cutting bills for lower value properties but increasing them for top-tier homes. He followed that up with hikes on second properties.
Home values in prime central London are down almost 21% since 2014, according to Savills. Knight Frank’s sales index, a long-running gauge of the city’s top properties, peaked in August 2015. It’s down 19% since then.
London’s Property Market Has Lagged Behind Other UK Cities
A crackdown on money laundering and unexplained wealth, as well as sanctions on wealthy Russians have also thinned the ranks of overseas buyers that once dominated the top end of London’s property market.
One Russian billionaire caught up in the sanctions was Andrey Guryev, the founder of fertilizer giant PhosAgro. He’s also the owner of ‘Witanhurst’.
London’s slump reflects a broad global decline in high-end property prices. Earlier this year, Savills predicted that at least half a dozen major cities would see price drops in 2025.
“Global capital cannot move around the world as pain-free now,” said Ben Sanderson, managing director of real estate at Aviva Investors.
Prime London Homes Are Taking Longer to Sell
Quick deals are becoming rarer as buyers looks for price cuts.
In London, as the time to sell increases, deeper price reductions are on the cards.
A detached house in west London sold for £5.2 million in November, roughly 15% below its original asking price. The property was marketed at about £6 million for four months and received zero bids in that time, according to Jo Eccles, the buying agent involved in the deal.
In the same month, a double-fronted mews house in Knightsbridge — a stone’s throw from the luxury Harrods department store — had its asking price reduced to less than £13 million. As recently as 2023, it had been listed at £17 million, according to Knight Frank.
With the tax environment becoming more hostile, some wealthy arrivals have turned to rentals rather than committing to an expensive home purchase.
Charles McDowell, a broker whose decades-old London property firm has traditionally advised clients on buying multi-million pound homes, has broadened his services into lettings. He set up a unit last year following a surge in demand from London movers worried about potential policy changes under the soon-to-be-elected Labour government.
“Those people are looking to rent instead so they can get a full picture of the tax environment before putting down roots,” he said. “They’d rather take a ‘wait and see’ approach right now.”
