Tax hikes trigger steep decline in prime London second home sales

A new analysis reveals a dramatic 42% drop in second home transactions across London, with prime central areas suffering the steepest declines amid rising tax costs and political uncertainty, signalling a turning point for the capital’s high-end real estate market.

New research highlights a significant downturn in second home purchases across London, with a particularly steep decline in the prime central London market. According to analysis based on Land Registry sold price data by Jefferies London, second home transactions in the capital have fallen by 42% over the past year. In the prime central London area, the drop is even more pronounced, with a 51% year-on-year decrease. These figures reflect a marked contraction in investor activity and demand for additional properties in key London postcodes.

The study categorised transactions into primary residential purchases and additional property purchases, the latter including buy-to-let investments and sales to non-private individuals. Across Greater London, overall transaction volumes dropped by 20.5%, driven largely by a 41.6% decline in additional property purchases. Within prime London, total transactions decreased by 27%, with additional property sales falling over 51%, now representing just 9.1% of total sales—a steep fall from 13.7% the previous year.

This contraction follows a series of government tax reforms that have increased costs for owners of second homes. The Stamp Duty surcharge for second properties rose from 3% to 5% in October 2024, significantly raising the upfront acquisition costs. From April 2025, councils gained powers to apply council tax premiums on second homes, further increasing ongoing holding expenses. Adding to market uncertainty are government proposals to replace Stamp Duty with a new annual property tax, a move which has been met with wariness among investors, particularly in the prime market.

The impact at a postcode level is striking. Six prime London postcodes, including prestigious areas such as Marylebone, Fitzrovia, Soho, Mayfair, and St James’s, reported zero second home sales in the last year. Other areas experienced drastic declines: King’s Cross saw a 94.6% fall, New Oxford Street 90.9%, and Vauxhall, Nine Elms, Borough, and Kennington 86.8%. Damien, founder of Jefferies London, commented, “The prime London market has long attracted international and domestic investors alike, but successive tax hikes on second homes have significantly dampened appetite and this has resulted in a contraction where sales volumes are concerned.”

The research echoes broader trends seen in high-value property transactions. An analysis by Jefferies London indicates that average sold prices in prime London areas have suffered steep declines, with Mayfair experiencing a 60% drop year-on-year. Chelsea, Belgravia, and Westminster have also seen notable price falls—an outcome attributed to a slowdown in high-end sales rather than an overarching collapse in the prime market. Sellers tend to transact at lower price tiers, reflecting reduced buyer appetite for the most expensive properties.

Further compounding the market challenges, a survey by Beauchamp Estates revealed a 25% decline in billionaire home purchases in London during 2024. This drop has been linked to tax changes, the UK’s ‘non-dom’ regulatory framework, and political uncertainty surrounding the UK General Election. Although luxury property sales over £15 million still occurred, numbers decreased from 54 transactions in 2023 to 40 in 2024, underscoring caution among ultra-high-net-worth buyers.

Adding another layer of context, reports from LonRes and Reuters have noted a broader cooling of the high-end London property market. Sales of prime properties in central London declined by 7.5%, with average selling prices falling by 4.2%. A combination of tax concerns and market sentiment is influencing buyer behaviour, despite an increase in new sales instructions. National house price trends also reveal the first annual decrease since early 2024, especially concentrated in southern England’s more expensive segments, where potential tax hikes loom largest.

The evolving tax landscape and corresponding market reactions place policymakers at a crossroads. Damien of Jefferies London emphasised the delicate balance needed, stating, “It remains to be seen where we go from here. On the one hand, the potential overhaul of stamp duty could act as a catalyst and drive buyer activity, however, introducing a new annual property tax targeting high-end homebuyers could risk deterring even more buyers. Policymakers must tread carefully if they want to ensure that London remains an attractive and competitive destination for global investment.”

As London’s prime property market grapples with these headwinds, investor sentiment and transaction volumes continue to reflect the substantial influence of tax policy on high-value real estate decisions.

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Source: Noah Wire Services

Noah Fact Check Pro

The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.

Freshness check

Score:
8

Notes:
The narrative presents recent data on a significant decline in second-home purchases in London, with a 42% drop over the past year and a 51% decrease in prime central London. This aligns with recent reports from Property Industry Eye, indicating a 25% drop in £15m-plus property deals in London in 2024. ([propertyindustryeye.com](https://propertyindustryeye.com/londons-super-prime-property-market-slumps-to-five-year-low/?utm_source=openai)) The report also references data from Jefferies London, a reputable property brokerage, enhancing its credibility. The inclusion of specific dates and figures suggests a high level of freshness. However, the reliance on a single source for the data may limit the narrative’s originality. Additionally, the report’s focus on tax reforms and their impact on the market provides timely context, further supporting its freshness.

Quotes check

Score:
7

Notes:
The narrative includes a direct quote from Damien, founder of Jefferies London, commenting on the impact of tax hikes on second-home purchases. A search for this quote reveals it is unique to this report, indicating originality. However, the absence of corroborating quotes from other industry experts or sources may limit the depth of the narrative.

Source reliability

Score:
6

Notes:
The narrative originates from Property Industry Eye, a publication focused on the property industry. While it references Jefferies London, a reputable property brokerage, the publication itself is not widely recognised as a major news outlet, which may affect the perceived reliability. The lack of additional sources or references to mainstream media outlets further limits the narrative’s reliability.

Plausability check

Score:
8

Notes:
The narrative’s claims about the decline in second-home purchases and the impact of tax reforms are plausible and consistent with recent market trends. The inclusion of specific data points and references to known market analyses adds credibility. However, the absence of corroborating sources or additional expert opinions may raise questions about the comprehensiveness of the analysis.

Overall assessment

Verdict (FAIL, OPEN, PASS): OPEN

Confidence (LOW, MEDIUM, HIGH): MEDIUM

Summary:
The narrative presents recent data on a significant decline in second-home purchases in London, aligning with recent reports from Property Industry Eye. While the inclusion of specific dates and figures suggests freshness, the reliance on a single source and the lack of corroborating quotes or additional sources may limit the narrative’s originality and reliability. The plausibility of the claims is supported by recent market trends, but the absence of additional expert opinions or sources raises questions about the comprehensiveness of the analysis. Therefore, the overall assessment is OPEN with a MEDIUM confidence level.