Prime London Property Prices Fall 3.2%

Average prices for prime real estate in central London fell by 3.2% from January to August, marking the sharpest decline since March 2021. They are now 20% lower than during their last peak ten years ago, reports Bloomberg, citing Knight Frank data. Analysts attribute the drop to tax reforms for foreign owners and weakening external demand.

The decline has affected leading districts of the premium segment – Kensington and Chelsea, Westminster and parts of Islington, where wealthy foreign homeowners are concentrated. Tom Bill, Head of UK Residential Research at Knight Frank, believes that the revision of the taxation regime for non-doms sent a clear signal to overseas investors and cooled interest in the London market. “The UK is probably a little less friendly towards wealthy foreign investors than it was a few years ago, so international demand has softened slightly,” he said. “In markets such as central London, there is an atmosphere of hesitation due to rumours about what might happen to taxes overall.”



Since April 2025, the UK has fully abolished the non-domicile status, which had existed for more than two centuries and covered about 74,000 non-residents. It allowed wealthy foreigners to avoid paying taxes in the UK on overseas income and assets, making London one of the main hubs for global capital holders. The new reform package also affected the Stamp Duty Land Tax system: the exemption threshold for first-time buyers was reduced from £425,000 to £300,000, and for others – from £250,000 to £125,000. This led to a sharp rise in the tax burden: first-time buyers alone are now overpaying tens of millions of pounds.

These steps effectively dismantled the system of tax privileges that for decades supported strong foreign investor interest in the London market. Capital owners have now lost their key motivation to purchase property in the UK – the ability to keep a significant share of their income and inherited assets outside the country’s tax jurisdiction.



Under these conditions, some investors prefer renting instead of buying. Broker Charles McDowell notes that more clients are “taking a pause” while awaiting clarity on tax policy. His company has already opened a division specialising in rentals in prime neighbourhoods. Nick Gregory, Head of Research at LonRes, adds that the market has plenty of motivated sellers, yet many listings do not match buyers’ expectations – either in quality or in price.

An additional factor has been tighter anti–money laundering measures and checks on the origin of funds, as well as sanctions imposed on wealthy Russians. The share of foreign buyers – long a defining force in the premium segment – has noticeably declined. Among those on sanctions lists is billionaire Andrey Guryev, founder of PhosAgro and owner of Witanhurst, the largest private home in London.

Pressure on the market is also coming from uncertainty ahead of the autumn budget, which Finance Minister Rachel Reeves will present on 26 November. Investors fear another tax hit on high-net-worth individuals, as the government must find tens of billions of pounds to meet its fiscal rules. Economists note that room for manoeuvre is limited: rising bond yields and worsening GDP forecasts may erode the remaining fiscal flexibility. Against this backdrop, interest in top-tier properties remains weak, and new deals are mostly closing at adjusted prices.



Experts warn that the tighter regime may trigger an outflow of wealthy non-residents and, contrary to expectations, reduce revenue from the tax reform. London risks losing part of its traditional buyer base – highly mobile capital owners who actively invested in prestigious districts and supported steady demand for properties priced above £5 million. The market is already seeing postponed and cancelled deals, while sellers are forced to offer significant discounts to retain buyer interest.

Camilla Dell of Black Brick reports a rise in forced sales through receivership: as holding costs rise and demand weakens, owners lose the ability to maintain assets. Many properties sit on the market for months – a £6 million home in West London sold only after four months and at a 15% discount, for £5.2 million. In Knightsbridge, another mansion’s price dropped from £17 million to under £13 million.



The Knight Frank sales index, reflecting dynamics in the prime segment, peaked in August 2015 and has since fallen by 19%. Domestic demand for luxury housing remains relatively stable, according to experts, but no longer offsets the decline in foreign buyer activity. Most deals now close with substantial concessions from initial asking prices, and time on market has increased. Analysts at the agency believe that demand recovery is possible only if three factors converge – tax clarity, stabilisation of economic forecasts and lower interest rates. For now, the mood in London’s premium segment is one of caution and waiting, which may persist until the end of 2025.

According to ONS and Hamptons, over the past decade price growth in London has significantly lagged behind other UK regions, undermining the city’s reputation as an investment destination and weakening market confidence. Anisha Beveridge, Head of Research at Hamptons, emphasises that London no longer appears as attractive to buyers as it did ten years ago.

Savills’ calculations show that since 2014, property values in prestigious central districts have fallen by nearly 21%. Analysts at the firm expect a further 4% drop by year-end, while Black Brick allows for a deeper decline – between 8% and 10%.