The chancellor’s recent Budget has delivered a welcome dose of certainty for prime London property, sparking short-term relief across the market, according to Knight Frank.

The much-discussed High Value Council Tax Surcharge proved less punitive than feared, easing anxieties that had stalled transactions. While the approach of Christmas has limited new deals, buyers who had previously paused are now moving ahead.

Tom Bill, head of UK residential research at Knight Frank, said: “The impact of prolonged tax speculation has been clear on prices. Nationwide and Halifax both reported that UK annual house price growth nearly stalled last month, while prime central London (PCL) saw prices fall 4.3% over 12 months – the largest decline since February 2021.

“Prime outer London (POL) also posted negative growth for a second consecutive month, slipping to -0.3%, its lowest level since the 2024 general election.”

The new council tax surcharge will affect pockets of outer London. Knight Frank calculations show that in Richmond, just over 7% of properties are worth more than £2m, with Hammersmith & Fulham at 4.5%, Merton at 3.5%, and Wandsworth at 2.9%. Camden and Islington will see 6.9% and 2.2% of properties affected, while central London hotspots Kensington & Chelsea and Westminster remain more heavily exposed, at 18.5% and 12.4% respectively.

Bill continued: “Sales volumes have already responded to the newfound clarity. Exchanges across PCL and POL were around 5% higher than the five-year average in November, with properties above £5 million seeing a 21% increase.

“Looking ahead, with tax certainty largely in place, political risk has emerged as the dominant near-term concern. Market participants are increasingly factoring in potential changes in government following the local elections next spring, which could shape the pace and direction of tax and housing policy for years to come.”