Andy Noton, 15 November 2023
London's high-end real estate market, known for its luxurious properties and prime locations, is experiencing a significant transformation. In the past year, £5 million+ residential property sales in the traditional hotspots of Westminster and Kensington & Chelsea have declined by a third, as Russian buyers exit the market. According to our research, these traditional prime central London locations have experienced a 35% and 31% drop in sales*, respectively, over the past year.
One of the most notable drivers of this decline in £5 million-plus property sales in central London is the departure of Russian High Net Worth Individuals (HNWs) from the market. The invasion of Ukraine and the subsequent Western sanctions have made it increasingly difficult for Russian HNWs to invest in London's real estate. The challenges of moving assets from Russia to the UK have acted as a significant deterrent.
£5m property sales in traditional ‘prime’ central London have held steady for years. This sharp decrease shows how sensitive London’s high-end real estate sector is to sanctions on foreign HNWs.
The introduction of the 'register of beneficial ownership' for UK properties has further discouraged overseas buyers. The removal of anonymity associated with property ownership has raised concerns among HNWs about their London addresses becoming widely known.
There are many reasons why such individuals may choose to keep their anonymity. For example, keeping their location private for security reasons. If it becomes difficult for them to do so, it will begin to affect the sales of prime properties in London.
The Annual Tax on Enveloped Dwellings (ATED), an annual charge on owning residential properties through a company, has also contributed to declining sales. The cost of ATED, now at £67,000 per year for a £5 million property, may deter some overseas HNWs. However, for those who prioritise anonymity, it remains a viable option.
While traditional prime central London have seen a sharp decline in high-end property sales, less central boroughs such as Camden, Barnet, Wandsworth, and Wimbledon have shown resilience in sales. This suggests that the definition of 'prime' areas in London is evolving. UK-based HNWs are increasingly opting for these areas – £5m in Wimbledon can buy much more than it would in Westminster.
Despite the challenges posed by the exit of Russian buyers and regulatory changes, London's high-end real estate market remains resilient as there still seems to be strong interest from Gulf buyers, with oil now trading at over $90 a barrel. These buyers represent a diverse pool of investors who still value London's luxurious mansions.
We specialise in navigating the complexities of London's property market and can provide tailored advice to meet your unique needs. Areas we can assist on include tax planning around Inheritance tax, ATED and capital gains tax alongside compliance services whether looking to rent out, acquire or dispose of UK residential property. Get in touch with Partner, Andy Noton (email@example.com) for a confidential chat.
*Source: HM Land Registry