Non-doms are leaving the UK but selling their London home, for some, is clearly a step too far, according to 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,” said Knight Frank’s Tom Bill. “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.
Knight Frank calculated last month that the government has lost more than £400m in stamp duty on sales above £5m since the reforms were first flagged by Conservative chancellor Jeremy Hunt in March 2024.
However, supply has not risen noticeably in the capital’s highest price brackets.
Bill explained: “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 £5m 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 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 re-activating 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.”
“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,” Bailey added.
It has led to stronger activity in the prime and super-prime lettings market in the capital.
The number of exchanges above £5m 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.
As far as the prime London lettinsg market is concerned, landlords selling a prime London property face the challenge of downwards pressure on prices, Knight Frank has reported.
More are exploring a sale due to the tougher regulatory environment. In addition to the prospect of stricter energy efficiency rules, the forthcoming Renters Rights Bill could make it more onerous to regain possession of a property and raises the risk of void periods.
However, achieving their asking price is not guaranteed.
Average prices in prime central London (PCL) fell 2.5% in the year to June, which was the second largest fall since March 2021, in part due to the political climate.
Meanwhile, prices in the more domestic and needs-driven market of prime outer London (POL) are under pressure due to higher levels of supply. As well as an overhang of stock following March’s stamp duty cliff edge, there is competition from other landlords who are also trying to sell.
The result is that some owners are caught in the no man’s land between selling and renting out their property.
“There is a sense of limbo at the moment in the lettings market. We have the Renters’ Rights Bill on the horizon but there is speculation that it could be delayed,” said Gary Hall, head of lettings at Knight Frank.
“Those landlords that are trying to sell are finding they are not necessarily able to do so quickly because there is so much stock around. A number of them are therefore bouncing between lettings and sales and back again after failing to get their asking price.”
As more landlords attempt to sell, the result is fewer new properties available to let.
The number of lettings instructions from landlords fell 8% in the year to June compared to the previous 12 months, Knight Frank data shows.
It tallies with data from Rightmove, which shows the number of new rental listings in prime central and outer London was 11% below the five-year average (excluding 2020) in the first six months of the year.
There are reports that the Renters Rights Bill faces delays and may not come into force this year. After last week in Parliament, it certainly can’t be the most pressing issue facing the government.
Average rents in PCL increased 1.5% in the year to June but rose 1.7% over the first half of the year. It was the biggest increase over a six-month period since January 2024, a period when rental value growth was cooling after the market experienced supply shortages during the tail end of the pandemic – see chart.
It demonstrates how rents have started to climb higher as stock levels fall. In POL, annual growth of 1.5% was driven by an increase of 0.8% over the last quarter. The three-month growth figure was last surpassed in November 2023.
What happens next to prime London rents depends more than normal on the performance of the sales market.
Read the orginal article: https://propertyindustryeye.com/non-doms-flee-london/
