Some of London’s most expensive residential markets are facing a sharp correction, with property values in Westminster falling more than 25 per cent in a year as tax changes and the departure of wealthy international buyers reshape the prime market.
According to figures from the UK’s Office for National Statistics, house prices across inner London fell 8.3 per cent in the 12 months to June 2026.
But the declines have been considerably steeper in some of the capital’s most prestigious areas. Westminster, which includes suburbs such as Mayfair, Belgravia and St John’s Wood, recorded a 25.4 per cent annual fall, while prices in the City of London dropped 20.4 per cent and Kensington and Chelsea fell 14.7 per cent.
The figures were reported by The Times, which said high-end agents were blaming the slowdown partly on changes to the UK’s tax treatment of wealthy international residents.
The UK government abolished its long-standing non-domiciled, or “non-dom”, tax status last year, while higher stamp duty charges have increased the cost of buying property for overseas purchasers.
At the same time, the UK is preparing to introduce a new council tax surcharge on homes worth more than £2 million from April 2028.
Fewer buyers, more cautious market
Trevor Abrahmsohn, who runs London agency Glentree Estates, also told The Times that the pool of buyers for high-value properties had contracted significantly.
He said a £3 million property might previously have attracted about 40 potential buyers within four weeks and generated five bids – now, he said, the same property might attract just 10 potential buyers and one or two bids.
“The frenzied activity has reduced significantly. No one is in a rush,” he said.
The shift is particularly significant for the international buyers who have traditionally played an outsized role in London’s prime property market.
Renting a $76,000-a-week home
Rather than absorb the substantial upfront tax bill, some wealthy buyers are choosing to rent.
Abrahmsohn described renting multimillion-pound homes as an increasingly attractive alternative because tenants avoid the stamp duty payable when purchasing.
Some luxury rentals are now reaching £40,000 a week, which is about A$76,000 based on an exchange rate of roughly A$1.90 to £1; that is equivalent to almost A$4 million a year in rent.
The trend was also highlighted by PropertyWire, which reported that non-UK residents purchasing an additional London property could face stamp duty rates of up to 19 per cent.
For example, the 19 per cent tax on a £20 million property would amount to £3.8 million, or about A$7.2 million and on a £30 million purchase, the tax bill could reach £5.7 million, or roughly A$10.8 million.
PropertyWire reported that the combination of high stamp duty, uncertain capital growth and substantial ongoing ownership costs was changing the traditional buy-versus-rent calculation for international buyers planning to stay in London for only a few years.
The maths behind the luxury rental boom
The financial calculation becomes particularly striking at the top end of the market.
PropertyWire also reported that high-value London properties can carry annual running costs of £500,000 or more, or around A$950,000, once security systems, swimming pools, lifts, air conditioning, landscaping and other expenses are included.
For an international buyer expecting to remain in Britain for around five years, renting can therefore avoid not only the initial stamp duty bill but also the costs associated with owning and maintaining the property.
It also leaves the buyer’s capital available for investment elsewhere; the result is a market where the wealthiest prospective buyers are increasingly behaving like tenants rather than owners.
London’s broader market is also cooling
The weakness is not confined to the luxury end; across the UK, house prices rose 2 per cent in the year to June, down from 3 per cent annual growth in May.
Greater London was the only UK region to record an annual decline, with prices down 2.5 per cent compared with June 2025.
The contrast with other regions has become increasingly pronounced. In north-west England, prices rose 4.7 per cent over the year to June.
Economists have pointed to London’s higher price points and greater exposure to mortgage-rate increases as factors behind the weaker performance.
Rob Wood, chief UK economist at Pantheon Macroeconomics, expects UK house price growth to slow further, forecasting an average increase of just 1 per cent in 2026.
A warning for other global property markets?
London’s experience offers a striking example of how changes to property taxes can alter behaviour at the top end of the market.
The issue is not simply whether wealthy buyers can afford a property. It is whether the tax and ownership costs make buying more attractive than renting.
For agents operating in international and luxury markets, that distinction could become increasingly important.
When transaction costs reach millions of dollars, even ultra-wealthy buyers can decide that ownership no longer makes financial sense – particularly when they expect to live in a city for only a limited period.
For London’s luxury market, the result is already being felt in fewer buyers, longer decision times, falling prices and a growing appetite for some of the world’s most expensive rental properties. That growing rental appetite also represents an opportunity for agents who can reposition their offering around premium leasing and property management services for this cohort, rather than relying solely on sales.
Obviously, London may still have an irresistible allure for global wealth. But for some of its richest residents, that increasingly means renting rather than buying.
For agents in Australia and New Zealand working with high-net-worth or expatriate clients, London’s experience is a useful reminder that tax policy changes can quickly reshape demand at the top end of the market. Keeping an eye on how offshore buyers respond to shifts in stamp duty, surcharges or residency rules – and being ready to offer strong rental and property management options alongside sales – can help agents stay relevant as client priorities change.