Jo Eccles explores the short- and long-term effects on buyers and renters navigating the post-budget and election landscape.
Months of speculation surrounding the UK budget and US election have given way to clarity, enabling informed decisions about staying, leaving, or relocating to the UK. Below, Jo Eccles highlights key trends shaping the prime London property market.
- US Election: Americans Embrace London
American interest in London has remained steady, bolstered by the city’s lifestyle and tax implications. Increasingly, Americans are purchasing property sooner than before, often skipping the traditional five-year rental period. Demand from American buyers reflects a long-term commitment to London as more choose to settle permanently.
- Non-Doms: Financial and Emotional Decisions
The impending UK tax changes for non-UK trusts are prompting many ultra-high-net-worth individuals (UHNWIs) to leave before April 2025. However, decisions often extend beyond finances, with lifestyle and family considerations playing pivotal roles. For example, one hedge fund client prioritised staying in London due to his spouse’s preference, while another rejected Dubai for its unsuitability as a place to raise children.
- FIG Regime: Prime Rental Demand Set to Surge
The upcoming Four-Year Foreign Income and Gains (FIG) tax relief will encourage new residents to the UK. However, the limited supply of prime rental properties may challenge renters as many landlords have exited the market. This regime is expected to drive demand for high-end rentals rather than purchases.
- Stamp Duty: A Barrier for Some, a Trophy for Others
The additional 2% surcharge on second homes is deterring many international and UK buyers, pushing some toward rental options. For example, a Canadian buyer reconsidered a £3.5m purchase after learning his stamp duty had increased to £580,000. However, high-net-worth buyers seeking trophy properties remain largely undeterred.
- Capital Gains Tax: Entrepreneurs Act Fast
With CGT rates increasing over the next two years, entrepreneurs are accelerating business sales to lock in the lower 10% rate. As a result, they represent a growing portion of buyers in the prime market. Many are cautious with their newfound wealth, often balancing modest purchases against lifestyle upgrades.
- Inheritance Tax Changes: Early Wealth Transfers
Starting in 2027, unspent pension pots will face inheritance tax, prompting earlier wealth transfers from parents to children. Many parents are selling secondary homes to fund weddings, school fees, or first-time home purchases, although concerns about retaining enough for future care costs persist.
- Private Equity: Minimal Disruption for Now
Private equity clients, who make up over 35% of Jo Eccles’ clients, are less affected by CGT increases from 28% to 32%. This ensures continued demand within this segment, with London remaining a competitive option compared to other global cities.
- Supply Dynamics: £5m+ Properties Retained
Sub-£5m properties are increasingly sold as landlords consolidate, adding to market supply. Properties valued above £5m, however, are often retained as owners maintain a London base or find their asking price unmet.
- Interest Rates: Renewed Buyer Confidence
The recent Bank of England rate cut to 4.75% has bolstered buyer confidence. Many are opting for fixed-rate mortgages to mitigate risk, while more buyers are expected to enter the market in 2025.
- London’s Enduring Appeal for Families
London continues to attract young families relocating for job promotions or education. Schools offering IB and SAT options enhance its appeal for international buyers, particularly those planning for their children’s university education abroad.
The prime London property market is navigating a landscape shaped by new tax rules, changing demographics, and evolving buyer priorities. Despite challenges, London remains a globally attractive destination for investment and living.
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