The UK’s prime housing markets have been adversely affected by the impact of political and fiscal changes in recent months, and that trend looks set to fall, as purchasers and sellers remain cautious following the Budget.

Headline Price Movements in the Prime Housing Markets

Savills: Prime Sales Index, Q4 2024

Mixed Fortunes in London

Values for prime properties in the more domestic and debt-reliant outer London markets grew marginally over the past three months (+0.3%) led by growth in Hackney (+1.7%) and Shoreditch (+1.4%), as their prime markets mature.

In contrast, average values across prime central London remain suppressed (-0.8%), as the immediate impact of the new government’s first Budget is felt in locations with the highest concentrations of wealth, and a more international buyer base.

Those factors weighed heaviest in the markets of Knightsbridge (-2.0% in the quarter), South Kensington (-1.6%) and Belgravia (-1.5%). Meanwhile, pricing in the markets of Marylebone and Notting Hill withstood the downward price pressures. In total, PCL prices are down -20.7% on their 2014 peak, presenting good value for buyers.

“The cautious mentality that we observed ahead of this summer’s general election and the Autumn Budget has persisted across prime markets as the year draws to a close, although properties continue to sell where they are priced competitively,” says Lucian Cook, head of residential research at Savills.

“Generally, needs-based buyers have underpinned market activity post-Budget, as they have benefited from relatively stable mortgage rates and the prospect of further base rate cuts in 2025. As a result, these sub-markets have been the strongest performers in London.

“However, prime central London locations remain the most price sensitive, as buyers and sellers adjust to the winding down of the ‘non-doms’ tax regime and the new SDLT surcharge for second home purchases. We expect market conditions to remain challenging in central London next year as the impact of these changes continues to be felt.”

Savills expects prime central London values to fall by -4.0% in 2025 (and +9.6% over the next five years) as the as the market finds its level in a changed fiscal and regulatory environment.

But outer prime London values are expected to remain flat (0.0%), with stronger growth forecast over the next five years (+14.7%), as this market is expected to see a ripple of demand from central areas as affluent upsizers react to higher school fees.

Regional price expectations soften

Beyond London, values continue to ease, with prices falling by a marginal (-0.2%) on the quarter, taking total price falls for the year to (-1.0%), significantly lower than price adjustments experienced in 2023 (-4.6 across prime regional markets).

However, values remain +9.6% up on the pre-pandemic average.

Prices of prime properties in the suburban markets closest to London, such as Northwood (+0.8%) and Weybridge (+0.6%), held up the strongest in the quarter, showing marginal growth. But, the prime markets of Scotland (0.0%), the Midlands and the North of England (+0.8%) proved most resilient overall in 2024.

SDLT surcharge impacts prime second-home markets

Meanwhile, the increase to the existing SDLT surcharge for additional properties has had a more meaningful impact across traditional second-home markets.

Prices of prime properties in coastal regions continued to fall by a further -1.4% in Q4. This has meant an adjustment of -5.4% on an annual basis, in a market which performed particularly strongly in the wake of the pandemic (values remain +9.4% above March 2020).

“The outlook is somewhat positive for prime markets beyond London,” continues Lucian Cook. “Prime regional hotspots are likely to benefit from some displaced demand as families look to strike a balance between house prices, commutability, and access to schooling.”

“While coastal and other popular second-home hotspots are likely to remain price sensitive next year, they are increasingly looking like good value, which could contribute to a pick-up in transactions as we head towards the summer.

Savills has forecast price growth of +2.0% for 2025 across prime regional markets, contributing to a five-year projected growth of +18.2%.