What does the Budget mean for UHNW buyers in London?

With more leaks than Thames Water – not least the OBR’s accidental preview on the day itself – the November Budget has been sending jitters among the UK’s high-net-worth property owners and prospective investors since late summer. 

Anticipation of punitive moves for the wealthiest home-owners had already taken its toll on confidence in the prime London market, where house prices fell by 4% in the year up to October – the biggest fall since February 2021 – and values are at their lowest since October 2011. 

Now there is clarity, at least. Recent uncertainty has driven many buyers and sellers to sit on the fence for a while and wait for the dust to settle. Fears of a mansion tax have proved to be founded. An annual charge on £2m+ homes, estimated to raise £400m by 2031, will come into play April 2028. 

After successive tax raids on the super-rich, including stamp duty increases and Non Dom changes, it may be the final straw that sends some UHNWIs scuttling to Dubai or Geneva. It may also set an artificial ceiling in the market at £2m, with sellers pricing their properties just below this threshold to ensure a quick sale. 

Given 80% of the UK’s £2m+ properties are in the London or the South East, it will hit home-owners in the capital hardest, especially long-term owners who are sitting on high-value homes after decades of capital appreciation but have little disposable income. 

But this is the least worst outcome for high-value home-owners and buyers in London. Months of uncertainty have already been factored into prime property prices, so the market is unlikely to be deluged with property for sale and prices are unlikely to suddenly plummet. Within an hour of Reeves’ announcement, buying agents were already reporting messages from clients instructing them to “move ahead” with multi-million pound purchases. 

The banded surcharge in practice means from £2,500-£7,500 a year extra for properties worth £2m-£5m+. Buyers in the top tiers of the market won’t struggle to absorb these extra costs, particularly if they know they are building in value by redeveloping or improving the property. 

Look at the bright side, too, of what didn’t happen. Reeves didn’t impose a capital gains tax on high-value primary residences – which would have been a further shot in the foot that London property owners didn’t need at the point of sale (although given average prices are lower than they were 14 years ago, few who have bought a property since then has made a gain anyway). And onerous reform to stamp duty bands – which remain based on values in 1991 – has been diverted for now. 

While some buyers have remained in the wings in recent months, waiting to see what Budget action unfolds, others have been capitalising on general nervousness and securing substantial discounts from vendors who felt it better to sell now than wait to see what may further hit the market down the line. 

Pied à terre purchases are dominating the prime market – in many cases, by buyers based outside of London and seeking a weekday base in areas such as Marylebone, Soho or Belgravia. Branded residences are also faring well in uncertain times. With the prestige, track record and financial clout of major, global names behind them, they provide the reassurance that wealthy buyers want. 

And turnkey properties will always be in demand. At Rive Gauche London, we can show clients the end value in taking on a project while sparing them the headache of doing it themselves. Contractor costs are still far above pre-pandemic levels, so it takes a team with the experience, contacts and end-to-end involvement to remove the risk from the equation. 

Uncertainty has stalled price growth in super-prime areas too, so for those seeking relative value, the price gap is narrowing between inner and outer prime areas of London. Chelsea, for example, is now 21% more expensive than Fulham, compared to 47% a decade ago. 

The other sector of the market that’s flourishing is prime and super-prime rentals. Many big ticket buyers waiting for Budget clarity have been renting in the meantime. As the new Renters’ Rights Bill sees more landlords exit the market, the supply of good, high-quality rental properties is diminishing and rents are rising. 

Now the Budget is over, it’s time to breathe. There is still huge opportunity in London for those who buy wisely and have a clear picture of their end-game, with all the figures and information at their fingertips. At Rive Gauche London, we can help you do precisely that.