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UK families are “seizing the moment” to snap up bargain luxury homes in exclusive London postcodes as a dwindling pool of international buyers, deterred by new non-dom tax rules, leads to double-digit price drops.
Estate agents say families living in prime areas of outer London, such as Barnes or Chiswick, who may not have previously been able to afford to step up into prime inner areas of the capital, are securing a foothold in the most exclusive neighbourhoods, such as Belgravia and Kensington.
“We have seen a lot more domestic market buying in prime central London because some sellers have adjusted prices to the point where they are affordable,” said Matt Thompson, head of sales at Chestertons.
“There’s definitely people eyeing family houses in Belgravia that they can now buy at less than £2,000 per square feet, which was not possible a few years ago,” added Stuart Bailey, head of prime central London sales at Knight Frank.
“Where a property has been listed for six to 12 months, double-digit reductions mean they are selling. Switched-on domestic buyers are seizing the moment while there’s less competition.”
Driving the change is a sharp cooling of interest in London by wealthy international buyers put off from setting up home in the capital by Labour’s new non-dom tax regime and stamp duty changes.
Mark Redfern, senior sales director at UK Sotheby’s International Realty, said prime central London was “definitely a challenging market” with price falls driven by recent tax changes affecting non-doms.
The withdrawal of these buyers, traditionally dominant in the prime market for £5mn-plus homes, has reduced competition in areas such as Kensington, Belgravia and Knightsbridge.
House prices in Kensington and Chelsea have fallen to their lowest level since 2013, according to Financial Times analysis of data from the Office for National Statistics published last month.
Data from Knight Frank, published on Monday, showed that the number of sales of prime residential London property in the six months to May fell 7 per cent versus the previous year.
The number of new prospective buyers registering for prime homes fell by 13 per cent over the same period, Knight Frank data also showed.
“Serious sellers, looking to sell in the next year, are cutting their asking prices to attract buyers,” Bailey said.
Chestertons’ Thompson reported price reductions of 5 per cent on some prime homes since January, translating to hundreds of thousands of pounds on a £5mn-plus property.
“People are thinking they couldn’t buy in that area, and they are definitely thinking again,” he added.
Data compiled for the FT by TwentyCi, a property analytics company, illustrated the sharp cooling of the prime market.
In the year to the end of May, 706 price reductions were reported on prime central London homes, against 1,333 new instructions, according to its data. This compared with 610 price cuts on 1,484 new instructions, the same time a year ago.
Prime homes were taking 50 per cent longer to sell, with the time to reach a deal in the second quarter averaging 216 days, compared with 144 days over the same period in 2024.
Under the old rules, non-doms could live in the UK without paying tax on overseas income and gains. Since April, this has been limited to four years and means their worldwide assets are subject to UK inheritance tax.
With elite international buyers considering other locations, such as Milan or Paris, opportunities have opened for UK families to buy into more exclusive London postcodes.
“For domestic buyers, if they want to buy in the most aspirational locations, they have less competition and more properties available,” said Lucian Cook, director of residential research with Savills, the estate agent.
“The balance of demand is changing and this is probably the biggest change in the prime market.”