Homes in London’s most expensive neighbourhoods are now selling for around a quarter less than they were a decade ago, as successive tax changes reshape demand at the very top of the market.
New analysis from Savills shows that prices in prime central London — defined as homes selling for £4.5 million or more — fell by 4.8% in 2025 alone, with a further 0.9% drop in the final quarter of the year. That decline brings the total fall since the market peaked at the end of 2014 to 24.5%.
The estate agency points to a long run of tax measures as the primary driver of the correction. Since 2016, a series of changes introduced by different chancellors have steadily increased the cost of owning high-value property in the capital, narrowing the pool of potential buyers.
Stamp duty is a major factor. Overseas purchasers buying additional properties in London can now face tax rates of up to 19%, meaning a £5 million home attracts a stamp duty bill of £863,750. That has significantly reduced transactional appetite at the top end of the market.
More recently, the abolition of non-domiciled tax status in April has compounded the slowdown. The regime previously allowed wealthy UK residents to shield overseas income from British tax, and its removal has prompted an estimated 1,800 non-doms to leave the country this year, relocating to lower-tax jurisdictions such as Dubai, Milan, Monaco and Geneva.
Further pressure followed in last month’s Budget, when Rachel Reeves confirmed that council tax for properties worth £2 million or more will rise by up to £7,500 a year from 2028. The announcement of the so-called mansion tax, alongside a two percentage point increase in income tax on property earnings, has added to uncertainty in the prime market.
Frances McDonald, director of research at Savills, said demand remains subdued in London’s most exclusive postcodes. “The pool of buyers is already much shallower since the end of the non-dom regime,” she said, adding that much of the Budget’s impact had been priced in after tax rumours began circulating late in the summer. “It will still take time for the market to absorb these changes, with moderate falls likely to continue into the new year.”
Separate analysis by Beauchamp Estates underlines the scale of the shift. In the £15 million-plus segment, it found that nearly two-thirds of luxury homes sold in London this year were owned by non-doms exiting the UK to limit future tax exposure. Many of those properties were bought by overseas buyers seeking occasional-use homes rather than full-time residences.
The weakness is not confined to the capital. Savills said that across the UK, prime regional markets — defined as homes selling for £1.85 million or more — recorded price falls over the past year in every region except Scotland, where values were flat.
The sharpest declines were seen in the country house market, where prices fell by 8.2% over the year. That drop reflects additional tax pressures, including the doubling of council tax on second homes from April and higher taxes on furnished holiday lets.
However, there are early signs that activity outside London may be stabilising. McDonald said the country market had endured a “very subdued year” but was beginning to show tentative improvement as buyers adjust to the new tax environment.
For now, though, the message from prime London is clear: the era of tax-light ownership at the top of the market is over, and prices are adjusting accordingly.
