Property company Savills reports that in Q4 2024, political and fiscal changes had an influence on the UK's primary markets as buyers and sellers remained cautious following the Budget.

Mixed Fortunes in London

As their prime markets mature, the value of prime properties in the more domestic and debt-reliant outer London markets increased somewhat over the last three months (+0.3%), with growth in Hackney (+1.7%) and Shoreditch (+1.4%) leading the way.

In contrast, average values across prime central London remain suppressed (-0.8 per cent), 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 per cent in the quarter), South Kensington (-1.6 per cent) and Belgravia (-1.5 per cent). Meanwhile, pricing in the markets of Marylebone and Notting Hill withstood the downward price pressures. In total, PCL prices are down -20.7 per cent 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 per cent in 2025 (and +9.6 per cent 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 per cent), with stronger growth forecast over the next five years (+14.7 per cent), 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 per cent) on the quarter, taking total price falls for the year to (-1.0 per cent), significantly lower than price adjustments experienced in 2023 (-4.6 across prime regional markets).

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

Prices of prime properties in the suburban markets closest to London, such as Northwood (+0.8 per cent) and Weybridge (+0.6 per cent), held up the strongest in the quarter, showing marginal growth. But, the prime markets of Scotland (0.0 per cent), the Midlands and the North of England (+0.8 per cent) 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 per cent in Q4. This has meant an adjustment of -5.4 per cent on an annual basis, in a market which performed particularly strongly in the wake of the pandemic (values remain +9.4 per cent 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 per cent for 2025 across prime regional markets, contributing to a five-year projected growth of +18.2 per cent.