Price growth in high-value prime areas has stalled due to the uncertainty surrounding the General Election, according to the latest analysis from Savills.
Frances McDonald, director of research at Savills, noted, “While there’s still market activity, the short odds on a change in government have injected caution into the market. Many prime buyers are choosing a wait-and-see approach, preferring to assess the outcome of the election before making any significant moves. This pause in decision-making has resulted in a noticeable slowdown in price growth within these prime areas.”
Savills’ analysis highlights that the current political climate has influenced buyer behaviour, with a number of high-end buyers adopting a cautious stance, leading to a temporary hold on price increases in the top-tier property markets.
“Nonetheless, the shorter-than-expected run-up to the general election may offer a chance for buyer interest to strengthen in the autumn, as uncertainties start to clear. Once the election outcome is more certain, we could see increased activity from buyers who were previously hesitant.”
In prime central London, property prices have experienced a modest decline. Over the last quarter, prices have dropped by 0.4%, and over the past year, they have fallen by 0.9%. This decrease translates to an average reduction of about £20,000 for properties valued at £5 million. This slight fall in value highlights the current caution among high-end buyers, as they await clearer market signals following the election.
The anticipated impact of non-doms tax changes is expected to be most significant in prime central London, where those affected are currently considering their options. It’s crucial to understand that not all prime central London buyers have non-dom status. The demand from both domestic and other international buyers continues to be strong, especially given the relative long-term value and increased stability in the mortgage market. This stability has been reinforced by some lenders beginning to lower their rates in anticipation of a potential base rate cut.
There is minimal evidence suggesting a surge in the number of properties coming onto the market. Many individuals impacted by the non-doms changes are likely to maintain their primary residences in London. However, these tax adjustments are expected to dampen demand and slow the pace of market recovery. Property values may experience fluctuations as these proposals become law. Despite these challenges, the underlying resilience of the market, supported by consistent buyer interest and improving mortgage conditions, is likely to continue providing a solid foundation for the prime central London market.
Frances McDonald, director of research at Savills, notes, “While the non-doms tax changes are influencing decisions in prime central London, the majority of buyers are not non-doms. They see the value and stability offered by the current market. The ongoing adjustments to mortgage rates by lenders, expecting a base rate cut, further enhance this stability. Although the new tax rules may temper demand and recovery speed, we do not expect a sudden increase in available properties. Instead, market values will likely vary as the changes are enacted.”
In other prime markets across London, prices have remained largely stable. Annual values showed a slight decline of 0.1%, while quarterly values saw a modest increase of 0.1%. This stability is mainly due to the strong demand for family homes, a relatively stable mortgage market, and a limited number of available properties, particularly in areas like Fulham, Putney, and Victoria Park. Several significant transactions have occurred in these areas in recent weeks.
Outside London, prices experienced a slight decline of 0.4% for the quarter, resulting in a 2.7% drop over the year. These areas had seen the most growth during the housing market boom of 2020 and 2021. Some buyers are holding off on their plans, waiting for potential interest rate cuts and clarity on future school fees. Despite the reduced demand, there are still enough committed buyers to keep the market active, according to Frances McDonald.
In all regions, urban property markets are performing better than rural areas as pre-pandemic trends shift, with buyers focusing on amenities and connectivity. Prime values in cities fell by 1.7% year-on-year, and in towns by 2.2%. This decline is less than in villages, which dropped by 2.9%, and other rural areas, down by 3.2%.
Labour’s proposed VAT on private school fees could lead to increased demand for state and grammar schools. This shift may drive up house price premiums around high-performing state schools.
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