Prime London’s property market appears to have absorbed the Government’s latest tax measures without the severe disruption many feared according to new data from LonRes.
While the Budget introduced two new tax rises for high-value homes, the sector has welcomed the end of months of uncertainty, even if it is too early for the full effects to show in the numbers.
Sales activity in November was 5.6% higher than a year earlier, though still 7.7% below the 2017–19 pre-pandemic average. New sales instructions fell sharply, down 29.1% year-on-year and 19.1% below historic norms, contributing to a gradual reduction in available stock from recent highs. Average prices slipped by 4% on the year and now sit 4.2% below pre-pandemic levels.
The £5m-plus market also showed signs of stabilisation after several months of tax-driven caution. Transactions in November were 3.3% lower than a year ago – an improvement on the steeper declines seen earlier in the autumn – and remain above long-term norms.
LOOSENING LETTINGS
Stock in this segment is still elevated, with 11.3% more £5m-plus homes on the market than a year earlier, although supply has eased from the record levels reached mid-year.
The lettings market, meanwhile, continues to loosen. Annual rental growth across prime London fell to just 0.7% – its lowest rate in over four years – as more properties came onto the market.
The number of available rental homes rose by 33.7% compared with last November, and both new instructions and lets agreed increased modestly. Despite the slowdown, rents remain 35.9% above their 2017–19 average.
The latest monthly figures largely capture activity before the Budget, but LonRes’s more recent weekly data points to a potential shift in sentiment.
MORE SALES THAN INSTRUCTIONS
In the final week of November, prime London recorded more sales than new instructions for the first time this year, with sales volumes reaching their highest weekly level outside the end of the 2021 stamp duty holiday.
A seasonal fall in new instructions is typical at this point in the year, although the drop was sharper than usual due to the long build-up to the Budget.
With tax clarity now restored, LonRes notes that some sellers are likely waiting until January before listing, meaning the true impact on supply will become clearer in early 2026.
SUPER-PRIME STOCK
At the top end, super-prime stock has started to unwind after reaching an all-time high in June. New £5m-plus instructions were down 31.3% year-on-year in November, while growing withdrawals helped ease the surplus. Even so, long-term supply pressures remain most acute in this bracket, with 75% more super-prime homes available than six years ago.
The cooling in the rental market is evident across all price bands, though dynamics differ. Sub-£1,000-per-week homes saw a 53% rise in availability over the past year but remain well below 2019 levels.
In the £5,000-plus bracket, annual stock growth was 48%, taking availability to 35% above 2019.
While prime London is not yet through the adjustment phase, the removal of uncertainty and signs of stabilising demand suggest the sector may enter 2026 on firmer ground.
COULD HAVE BEEN WORSE
Nick Gregori (main picture, inset), Head of Research, LonRes, says: “After months of speculation the Budget finally delivered its bad news in late November, but it could have been worse.
“The key changes for prime London property are a new annual tax on properties worth over £2m – likely to be known as the ‘Mansion Tax’ – and a 2 percentage point tax increase on landlord’s rental income.
“Compared to some of the changes mooted in the summer, these are likely to be much less damaging for the market, with the delay in the introduction of the annual tax until April 2028 also allowing a gradual adjustment.”
IMPROVING SENTIMENT
And he adds: “In the short term, the certainty offered now we are post-Budget is likely to see sentiment improve. Given the proximity of the end of the year, it may be that both buyers and sellers decide to wait until January, but there is likely to be some pent-up demand ready to be released.
“Indeed, there have already been signs that some of the deals perhaps delayed in the Budget build-up have now gone through – the week of the Budget saw the highest weekly sales of the year so far across prime London, barring the two weeks prior to the SDLT holiday ending in March.”
PRICE BUNCHING
“The negatives of this approach are likely to be the creation of ‘price bunching’ just below the thresholds – as seen in an extreme way under the previous SDLT regime – and an ongoing fear that the tax could be increased or its scope expanded.
“We have seen previously with ATED (Annual Tax on Enveloped Dwellings) that the original threshold of £2m was lowered to £500k within three years, with the charges for the higher tiers increased in excess of inflation.
TEMPTING
“This extra income could prove tempting for any government with a new black hole to fill. There is also a sense that this was a missed opportunity to make more significant reforms to the wider system of property taxation.
“Rental growth slowed again in November, falling to a more than four-year low of 0.7%. Activity remained steady on both the supply and demand sides, with small rises in both new instructions and agreed lets in November.
“At the end of the month, stock on the market was 33.7% higher than a year earlier, with rises across all price points.”
