London’s luxury property market for homes priced above £5 million has seen a slowdown compared to last year’s numbers, yet the market still shows robust activity, significantly higher than figures seen before the pandemic.

According to the latest data from property experts at Savills, while there’s a noticeable decline in transactions from the heights of the post-pandemic boom, the luxury property market in London is still performing well above its pre-pandemic levels. In the first quarter of 2024, 89 homes worth more than £5 million were sold, totaling £918 million. This represents a 20% drop compared to the first quarter of 2023, yet it’s a 44% increase over the same period in 2019, which saw only 62 sales.

Over the past year up to Q1 2024, there were 504 transactions in this elite category, divided into 352 homes priced between £5 million and £10 million, and 152 homes priced above £10 million. This sustained activity underscores the continuing allure of London’s high-end property market despite broader economic uncertainties.

Factors Influencing the Market

Frances McDonald, Savills’ director of research, notes that the market traditionally sees fewer transactions in the early months of the year. The current slowdown is attributed to several factors:

• Lower Inventory Levels: There are fewer high-end homes available on the market.
• Economic Uncertainty: The general economic situation has made potential buyers more cautious.
• Political Factors: With a general election on the horizon, there’s increased nervousness, particularly affecting the luxury segment, which tends to be more sensitive to political changes.
• Changes in Tax Policy: The government’s recent decision to phase out the non-domiciled tax status has led some international buyers to hold off on purchases as they assess the new landscape.

Shift in Buyer Dynamics

A significant trend in early 2024 has been the rise in domestic and needs-based buyers stepping into roles that were typically filled by overseas investors. Savills points out that houses, rather than apartments, made up 61% of the £5 million-plus transactions, the highest since the early pandemic period. The majority of these transactions were in traditional prime locations such as Mayfair, Belgravia, Chelsea, and Kensington, which together accounted for over half of the sales.

Mayfair has overtaken Chelsea as the most popular area, marking the first time since 2020 that it has led in luxury property sales. This shift reflects a broader trend of domestic buyers influencing the market dynamics, with significant activity also noted in family-friendly areas like Hampstead, St Johns Wood, and Kensington.

Future Outlook

Despite the upcoming general election and the potential for political change, the market appears to have already adjusted to these possibilities. Alex Christian, co-head of Savills Private Office, commented, “Old-established prime central London postcodes are continuing to dominate sales at the top end as, despite recent headlines, the global wealthy continue to see London as a desirable place to live. However, we have also seen a greater number of domestic buyers active in the market this year, and this has led to an uptick in house sales – particularly in the likes of Hampstead, St Johns Wood and Kensington – typically favoured by local buyers. Despite an impending General Election, the short odds on a change in government means that we believe that political change is already largely priced into the market. Despite this, the market remains price-sensitive as the majority of buyers remain cautious and are adopting a wait-and-see approach to see how policy plays out.”