"Many are keeping their property because of London’s long-term credentials compared to other parts of the world. In some cases, they are renting out their homes as a short-term option and looking beyond the next four years of the current government"
- Stuart Bailey - Knight Frank
In the week that Labour marks one year in power, some foreign investors are thinking beyond the five-year lifetime of this Parliament.
Under the old rules, non-doms could live in the UK without paying tax on overseas wealth. New regulations are tighter and come with a four-year time limit, which means countries like Italy, which has an annual flat tax that ringfences overseas assets, have become more attractive.
We calculated last month that the government has lost more than £400 million in stamp duty on sales above £5 million since the reforms were first flagged by Conservative Chancellor Jeremy Hunt in March 2024.
However, supply hasn’t risen noticeably in the capital’s highest price brackets.
The number of new sales instructions in the first six months of the year in prime central London (PCL) was 32% higher than the five-year average (excluding 2020), Knight Frank data shows.
Above £5 million, there was an equivalent increase of 14% and above £2 million, there was a rise of 22%. In other words, property listings in the first half of 2025 were skewed towards the lower price brackets.
Overall, supply is rising due to the stock overhang from March’s stamp duty cliff edge, buyers reactivating plans put on hold last year due to the political upheaval, landlords selling due to red tape and holiday homes coming to the market due to recent council tax changes.
London’s long-term credentials
“While there is evidence of non-doms leaving London and taking their tax dollars with them, it doesn’t mean they are necessarily selling up,” said Stuart Bailey, head of prime central London sales at Knight Frank.
“Many are keeping their property because of London’s long-term credentials compared to other parts of the world. In some cases, they are renting out their homes as a short-term option and looking beyond the next four years of the current government.”
It has led to stronger activity in the prime and super-prime lettings market in the capital, as explored here.
That’s not to play down the impact of the new non-dom rules, which mean some foreign investors have left and may not return even if the government proceeds with a rumoured U-turn on inheritance tax or announces plans for an investor visa.
The number of exchanges above £5 million in London fell 15% in the year to June versus the previous 12 months, Knight Frank data shows. Below that threshold, the numbers were flat.
That said, demand overall is recovering well following a weak start to Q2, which was marked by uncertainties over global trade and a stamp duty cliff edge. The number of offers made in PCL and POL in June was 21% higher than the same month last year.
However, as a result of the tougher political landscape, average prices in PCL fell 2.5% in the year to June, which was the widest decline since April 2024 and the second largest fall since March 2021.
Meanwhile, prices in prime outer London (POL), where demand is driven by domestic and needs-based buyers, are being squeezed by higher levels of supply.
Average prices in POL rose 0.9% in the year to June, which is down from a figure of 1.5% in March. A decline of 0.4% in the three months to June was the steepest quarterly fall since November 2023.
It echoed what took place in the wider UK market in June, with Nationwide posting an annual increase of 2.1%, which was the slowest pace of growth in two years.
