London’s super-prime market logs weakest year since Covid – but deals still being done

London’s prime and super-prime housing market is heading for its weakest year since the pandemic, as tax reform and political uncertainty reshape demand at the discretionary and internationally mobile end of the buyer spectrum.

While activity has slowed sharply at the very top end, a limited number of high-value transactions continue to complete in core prime postcodes, highlighting a market that is thinner, more price-sensitive and increasingly selective.

Sales slide at the top end

READ MORE: Prime rebound or relief rally? Brokers sense ‘window of opportunity’ as mansion tax dust settles

Transaction volumes at the prestige end of the market have fallen markedly this year. Sales of London homes priced above £5m are running well below last year’s levels, placing the segment on course for its worst performance since Covid-era disruption.

At the very top of the ladder, ultra-high-value deals have been scarce, with the largest transactions clustering below levels seen in recent boom years. For mortgage professionals active at the prestige end of the market, the data underline how sensitive ultra-high-net-worth (UHNW) buyers are to the wider fiscal and political environment – and how thin the pipeline can become when sentiment turns.

Tax and politics hit sentiment

Analysts point to a cluster of tax and policy changes as the main drag on demand:

• The abolition of the long-standing “non-dom” regime, which had allowed wealthy overseas residents to shelter foreign income and gains from UK tax, has narrowed the buyer pool at the very top end.

• Successive hikes to stamp duty on higher-value transactions have further increased entry costs.

• The forthcoming “mansion tax” on homes valued above £2m – due to start in 2028, with annual charges beginning at £2,500 and rising to £7,500 – has added another layer of uncertainty, prompting buyers and sellers to pause and reassess their positions.

Market commentators say the months leading up to the UK budget statement in November were particularly difficult, as a stream of policy suggestions around wealth and property taxes unsettled those considering large purchases. At the same time, scrapping favourable inheritance tax treatment for non-doms’ overseas assets has reinforced the perception among some global buyers that London is becoming a less hospitable tax environment.

For brokers and lenders, this climate has translated into longer decision cycles, delayed completions and more clients sitting on the sidelines while they wait for clarity.

Discounts deepen, but blue-chip locations hold up

Softer demand has forced many vendors to reassess pricing expectations. Across the £2m-plus and £5m-plus brackets, agents report increasing flexibility, with some sellers agreeing substantial reductions from initial asking prices to secure a deal.

That repricing has helped sustain activity in established prime neighbourhoods such as Holland Park and Notting Hill, where buyers with longer-term horizons are taking advantage of reduced competition and more negotiable terms.

Between August and October, the number of price reductions on homes marketed at £5m or more was around 27% higher than in the same period last year, and more than double the average level recorded between 2017 and 2019. For intermediaries, that combination of increased flexibility on price and less competition from rival bidders may support more bespoke funding solutions and higher-LTV opportunities for the right clients.

Mansion tax to weigh further on values

READ MORE: Why the mansion tax could freeze the prime market

Looking ahead, forecasters expect further downward pressure on higher-value London homes as the market prices in the mansion tax and broader tax changes.

Predictions published this month suggest homes worth more than £2m could see values fall by an additional 5% next year as buyers adjust to the new annual charges. The expectation is that London, particularly in its more expensive postcodes, will underperform the wider UK market over the next couple of years.

For brokers, that may mean more clients looking to refinance rather than trade up, greater interest in capital-raising on existing assets, and renewed focus on managing loan-to-value ratios as valuations soften.

Signs of stabilisation – and a global context

There are tentative signs that the pace of decline may be easing, with recent data suggesting activity at the £5m-plus level has stabilised relative to earlier in the autumn. Greater clarity following the budget has encouraged some buyers back into discussions, though sentiment remains cautious.

London’s slowdown also contrasts with conditions in several rival global cities, where high-end residential markets have remained more resilient. In locations such as Dubai and parts of the US, luxury transactions have continued at pace, underlining how sensitive London’s prime market is to domestic tax and policy signals.

This divergence underscores the challenge for UK policymakers: how to balance voter demands for a fairer tax system with the need to keep London competitive as a destination for global capital.

What it means for mortgage intermediaries

For mortgage intermediaries, several themes stand out:

• More complexity at the top end: UHNW and international clients will increasingly need advice that blends tax, legal and funding expertise. Collaboration with private banks, specialist lenders and wealth managers is likely to deepen.

• Opportunities from distress and discounting: Price reductions and vendor motivation in prime and super-prime markets could create attractive entry points for cashed‑up buyers and investors, driving demand for larger, bespoke facilities.

• Refinancing and restructuring: As values in the £2m-plus bracket adjust, some clients may look to refinance, restructure existing borrowing or release equity ahead of further tax changes.

• Higher value on certainty: In an environment marked by political flux and shifting fiscal rules, speed, certainty and flexibility of funding will be critical differentiators for brokers and lenders alike.

While London’s luxury housing market has clearly lost some of its post‑pandemic momentum, it remains one of the world’s most prestigious addresses. For intermediaries able to navigate the shifting tax landscape and advise on complex, cross‑border cases, 2025’s slowdown may prove as much an opportunity as a challenge.