History tells us that the prime housing markets of the UK don’t respond well to times of uncertainty. While underlying economic conditions have largely improved in recent months, activity and prices at the top end of the market have been tempered by the rumours surrounding November’s Budget.

Our recent client survey highlights that buyers, in particular, have become more cautious about committing, especially in the short term. This is, unsurprisingly, exacerbated among discretionary investor and second home markets.

Commitment from needs-based movers looking to upsize or relocate appears stronger, particularly in the longer term.

PRICE SENSITIVITY PREVAILS

This sentiment tallies with the results of our latest prime index, which show that across London, prices have fallen for a third consecutive quarter, leaving them down almost -2% over the past year.

Until this quarter, these price falls had largely been confined to prime central London.

Here, price falls continued over the summer with a drop of -1.8%, the biggest quarterly fall since the end of 2016 – a period marked by the EU referendum, a sudden change of prime minister, and the introduction of a new stamp duty surcharge. Demand in this location has been dampened by global uncertainty and a less hospitable tax environment, most notably for ‘non-doms’, even before the latest murmurings of change.

Outer prime London markets have now followed suit, though price falls have been contained to -0.7% during the past three months and -0.8% in the past year. The stronger domestic markets of South West and West London, in particular, have seen values remain relatively steady.

Needs-based moves are continuing, even though some buyers in these markets may be less likely to stretch themselves at a time when they’re unclear on any potential impact to their long-term finances.

Elsewhere across the UK, price falls have eased compared to last quarter, to -1.3%. But values are down by -3.6% over the past year, leaving them more than -10% lower than the peak of the market in late 2022.

Higher value properties have continued to see more significant price falls, but the gap in performance has narrowed.

Similarly, the prime markets of the Midlands, North, Scotland, and Wales remain more resilient, as relatively lower values mean there would probably be less impact from any potential tax changes. Meanwhile, those in the South have seen values fall more significantly, particularly in discretionary second home and coastal hotspots.

Looking at the longer term, prime regional prices are still up 9.1% on average over the past ten years, though for London they are -8.1% lower, with prices having fluctuated throughout this period. Given these figures, the Treasury’s ability to raise significant revenue from the suggested tax changes – namely the imposition of Capital Gains Tax (CGT) on primary residences – seems limited. Lucian Cook discusses the subject in greater detail, here.

A RESILIENT START TO THIS YEAR’S AUTUMN MARKET

Top end activity has shown surprising resilience in September, which typically signals the start of the traditionally busy autumn market.

Agreed sales net of fall throughs were down by only 2% annually for the market above £1 million in September, across the UK as a whole, highlighting pragmatism from both buyers and sellers.

For London, they are running at -10% below the level they were in September last year, while new instructions are up by 4%, showing willingness from sellers.

Regional markets look to be holding up better, with net agreed sales 3% higher, but more price changes (11%) are taking place to agree these new deals.

There remains opportunity for motivated buyers who are prepared to commit in a less competitive market, though the market will continue to be price sensitive.

THE TOUGH GET GOING

Until we have further clarity on what will and won’t be in Rachel Reeves’ Budget, we expect a continuation of current trends, as both buyers and sellers remain cautious. More generally, the prospect of a further rate cut throughout the remainder of this year is receding, given higher than expected inflation.

Regardless of any changes that come to fruition, the value on offer across central London is undeniable, and there may be some motivation from those who recognise the fundamentals of London and are willing to take a longer term view.

Elsewhere, much will depend on general sentiment and what happens post-Budget. There is the sense that some clarity, whatever the outcome, will be an improvement on the unknown period we find ourselves in now.

And, ultimately, any tax changes are likely to take some time for the market to absorb, before it enters a delayed recovery phase and is once again dictated by the age-old dynamics of supply and demand.

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_{Read the articles within Prime UK Residential – Autumn/Winter 2025 below}