Nervous millionaires and billionaires are putting off buying luxury London homes as they wait to see what will happen in the next Budget.

The number of homes sold in London for over £10 million has fallen by nearly a quarter (22%) compared to last year, with experts blaming uncertainty about tax changes.

Many wealthy buyers are worried about potential changes to the tax rules affecting them, including:

• Non-Dom rules: These rules affect people who live in the UK but don’t pay UK tax on their foreign earnings. Currently, around 74,000 people benefit from this status.
• Capital Gains Tax: A tax on the profit you make when you sell something that’s gone up in value, such as property.
• Inheritance Tax: A tax on the estate (money and property) of someone who has died.
• Carried Interest: This affects how much tax private equity fund managers pay on their earnings.
• Pension Tax Relief: This relates to the amount of tax relief you can get on pension contributions.

On top of these potential changes, new VAT rules for private schools are also causing concern amongst wealthy families.

Stuart Bailey, an expert in luxury London property at Knight Frank estate agents, said: “It’s the overall sense of uncertainty, rather than any single measure, that is making some people hesitate.”

He added that while there are plenty of expensive homes for sale, wealthy buyers are holding back because they don’t have to buy right now.

Non-Doms Flee

Worryingly, some non-doms have already decided to leave the UK, rather than wait to see what will happen in the Budget.

Mr Bailey believes that around 30% of homes sold for over £10 million in London in the last two years were bought by non-doms, suggesting that changes to the rules could have a big impact on the luxury property market.

Bargain Hunters Circle

However, it’s not all doom and gloom. The price of luxury London property is now 14% lower than it was at its peak in September 2015.

And for buyers using US dollars, the fall is even bigger, at 25%, thanks to the fall in the value of the pound since the Brexit vote.

Mr Bailey added that £100 million worth of luxury homes were snapped up in the weeks after the election, with many buyers sensing a bargain. He said: “It shows that irrespective of what may come in October, many buyers believe prices are at a low ebb.”