Sales of London’s most expensive homes slumped last year as super-rich buyers were put off by Rachel Reeves’ mansion tax, data shows.
Transactions involving homes worth £5million or more fell 11 per cent throughout 2025, according to the high-end estate agent Savills.
There were just 412 such properties sold, as the wealthy held back on concerns about potential property tax rises in November’s Budget, which were rumoured for several months beforehand. This compared to 463 the previous year.
Wealthy buyers spent a total of £4.09billion on homes priced at £5million or more across 2025, Savills’ figures suggest, a decrease of 18 per cent or nearly £900million on 2024.
In the Budget, Chancellor Rachel Reeves targeted owners of expensive homes with the biggest change to council tax in three decades.
From 2028, properties in England worth more than £2million will face a surcharge on top of their council tax, dubbed a ‘mansion tax’.
This will start at £2,500 per year, and go all the way up to £7,500 for the most expensive properties. It will rise by inflation each year.
About 200,000 homes will be affected – most of which are to be found in London and the south east.
In addition, new rules came into place in April 2025, effectively abolishing the ‘non-dom’ tax regime and associated perks. It is likely the rule change also affected the top end of the London housing market.
Savills said homes worth between £10million and £15million saw the steepest decline, with sales dropping by almost a third (31 per cent).
Most of these homes will be in prestigious central London neighbourhoods such as Mayfair, Knightsbridge and Chelsea.
The £5million to £10million market, in contrast, saw transactions drop 5 per cent on the year.
A home worth £5million could be in one of the above neighbourhoods, but the price bracket could also include affluent areas further from the centre of town such as Richmond, Hampstead and Fulham.
High-end jitters: Potential buyers of the capital’s most expensive homes, such as these in Holland Park, West London, were put off purchases by Budget rumours and tax changes
Frances McDonald, director of research at Savills, said: ‘Uncertainty over taxation and changes to the non-dom regime contributed to a slower £5million-plus transaction market in 2025, with volumes hovering well below the five-year average.’
Although the mansion tax made it into the Budget, other property tax rumours such as charging capital gains tax when someone sells their main home and makes a profit did not.
There had also been a rumour that the council tax surcharge could hit homes worth just £500,000, drawing hundreds of thousands more into the net.
Savills said activity in London’s prime postcodes picked up in the closing weeks of the year, as some wealthy home hunters ‘put Budget uncertainty behind them’.
Activity in the market increased by 7 per cent in the last three months of the year, it said, and the period between October and December also recorded the highest number of £10million-plus transactions.
McDonald added: ‘The “better than feared” result did lead to an uptick in activity over the last couple of weeks of the year, that has continued into 2026.
‘Price adjustments at the top end have also unlocked more demand, with many taking the view that prices are starting to stabilise and are taking advantage of the value on offer.’
It comes amid a wider downturn in the capital’s property market.
Prices in parts of London are in freefall, with some homeowners forced to cut their losses and sell for up to 50 per cent below what they paid.
Many had previously enjoyed years of consistent price increases.
Between 2009 and 2015, the average home in the capital rose by 83 per cent from a low of £263,000 to £482,000, according to Land Registry data.
But since then, house prices across swathes of the capital have barely moved – and in the case of flats, may have fallen.
Since the start of 2023, the average price of a flat in London has fallen by more than 7 per cent, Land Registry data shows. Single-storey homes, particularly new-builds, have been hit by concerns over service charges and the cladding scandal.
Land Registry data also shows price falls in some of London’s most exclusive postcodes.
In the City of Westminster, which includes popular areas such as Marylebone, Maida Vale, Bayswater, Paddington and St John’s Wood, average prices are down more than 27 per cent since the start of 2023, according to the Land Registry.
In Kensington and Chelsea, the average flat is now selling for less than £950,000 – down from almost £1.2m in 2023 after a 20 per cent fall.
