Within minutes of Rachel Reeves finishing Wednesday’s budget speech, Will Watson, head of the Buying Solution, a London agency which helps buyers find top-end properties, had two WhatsApp messages from clients. Watson said: “Both have been in negotiations on properties, and both of them said, ‘right, let’s get going. Let’s lock this down now’.”
Agents in the parts of London where house prices hover around £1,000 per sq foot, including Chelsea, Mayfair and Notting Hill, had blamed fevered speculation over the budget for sluggish growth in their sector over the past few months: figures published by Savills in October showed 41% of prospective top-end buyers in London had, “directly as a result of tax rumours”, become less committed to buying homes in the capital.
But after the chancellor’s “mansion tax” turned out to be far less extreme than feared – a banded council tax surcharge on homes worth more than £2m, which will start at £2,500 a year and rise to £7,500 a year for homes worth more than £5m from April 2028 – they say the way has been cleared for a surge of deals. The chancellor ducked the opportunity for a broader reform of a council tax system still pegged to 1991 values and widely regarded as unfair.
Stuart Bailey, head of super prime sales at Knight Frank, is anticipating “a release of those deals that have been under offer. People will think, ‘right. Let’s crack on’.”
It’s true that the market has been slow in recent months. Savills figures show that in central London, sales above £1m were down 10% in September compared to the previous year, and prices were down 4.7% year-on-year during the third quarter. In the four weeks before the budget, figures compiled for The Observer by the London property database LonRes show sales in prime central London were 19.5% below the same period in 2024.
While budget speculation is partly to blame, there are other contributing factors: in September, Savills warned that a raft of changes to how the ultra-wealthy are taxed, including the abolition of the “non-dom” status in April, which will force the ultra-rich to pay inheritance tax on global assets, and a council tax surcharge on second homes, had eaten away at London’s appeal.
What’s for sure is that Russians and Middle Eastern buyers, “the two mainstays” of the top end of London’s housing market, are “not really around” any more, said Anthony Payne, chief executive of LonRes. Russians, who made up a large portion of high-end buyers in the mid-2010s, have been ousted by sanctions issued after the invasion of Ukraine, while Middle Eastern buyers are “not heavy on London at the moment. They think London’s going through a political period,” said Payne. Off-putting stories about high crime rates in London, anti-immigration sentiment and violent protests are common outside the UK, he added. “These are the images of London that people are seeing. They look at that and think, do I want to be there at the moment?”
But for agents gearing up for a post-budget market revival, that might not matter. “We still have a lot of international buyers interested in London, especially from America,” said Alex Isidro, managing director at Sotheby’s International Realty. “I have lots of American referrals at the moment looking to rent or buy.”
And there are some signs that those tax changes might be clearing the way for more traditional buyers. “There has been this removal of people who were just buying London property as an investment,” added Payne. “They bought it as a one-way ticket to make a few quid. And even if they didn’t, it was a store of wealth. There has been a very marked change in the makeup of the buyer for central London property: now a homeowner is [a person] who wants to actually use these properties.”
By the end of the week, the relief felt by those at the top end of the market had filtered through to the UK’s traditional housebuilders, whose shares rose modestly. Although shares in housebuilders, including Barratt Redrow, Berkeley Group and Taylor Wimpey dipped in the minutes after the budget on disappointment that Reeves had chosen not to scrap stamp duty altogether in favour of an annual property tax, by Thursday they had recovered on hopes that the mansion tax announcement would be good for those at the lower end of the market, too. Half-way through the speech Barratt Redrow, the UK’s largest housebuilder, fell 2.6%; by the end of Thursday, shares in the company had risen 3.6% on the beginning of the week. Taylor Wimpey, which fell 1.23% during the speech, finished Thursday 3.4% higher.
“For us, the clarity on the property tax should unlock the customers who have sat on the sidelines through [the second half of 2025],” wrote Jefferies analysts in a note. “And this, in combination with the benefit of cumulative rate cuts and relaxed lending rules from earlier in the year, we believe could drive a bounce in reservation rates into 2026.”
There was, however, one note of caution. The message, from both ends of the market, was that while they expect a flurry of deals in the run-up to Christmas as stalled transactions get back on track, it may be several months before that growth becomes sustained. “Will we see a bit of action between now and Christmas?” asked Watson. “Maybe. But I'm hoping for spring next year. It should be busy.”
Photograph by Getty