Government faces £400 million loss from stamp duty on luxury property sales

In the United Kingdom, particularly within London, there has been a notable slowdown in the high-end property market as of early 2025. Specifically, during the first quarter of the year, only 34 properties were sold for over $10 million, which is about one third less than the same period in the previous year, 2024. The analysis from Knight Frank’s Global Super-Prime Intelligence report indicates this decline goes against the trends observed in global markets, which are typically thriving. One of the factors behind this discrepancy relates to changes in residency and taxation rules impacting wealthy individuals. High net worth residents, especially those within London’s prestigious postcodes like SW1 and W1, are demonstrating increasing volatility in their decisions regarding property investments. The government has already faced a significant drop in tax income, losing over £400 million in stamp duty on sales exceeding £5 million. This situation calls into question the reliability of wealthy individuals to support the UK economy through tax contributions. Tax reforms targeting non-domiciled individuals were introduced by the previous government and aimed to raise an estimated £13.1 billion by 2027/28 from about 10,000 individuals. However, the practical outcomes of these reforms have not met expectations. Recent insights from the Office for Budget Responsibility (OBR) highlight concerns that the behavioral responses of high earners to tax changes are less predictable, which has prompted a reassessment of the revenue expectations tied to these measures. The uncertainty surrounding high-earner behavior adds to the fragility of market confidence. Despite the downturn in high-value property sales, there is some hope as many affluent homeowners appear to be retaining their properties while evaluating their future options. The number of new property listings in prime central London has reportedly increased, with listings above £5 million rising by 14 percent compared to the five-year average. This suggests a wavering but potential underlying desire for investing in London real estate, indicating that while current circumstances present challenges, London remains a sought-after location for wealthy individuals. Policymakers are urged to reconsider their strategies, recognizing that relying on an affluent and mobile demographic may not be a sustainable method of addressing fiscal disparities.