Super-prime London’s cut-price property deals

Earlier this year, a client of buying agent Camilla Dell offered £3mn less than the c£20mn asking price for a home in a prestigious central London development completed in 2020. As the months wore on, the seller returned to Dell twice with revised prices above what she had offered. Each time, Dell’s client refused. Finally, a few days after the October Budget, the seller accepted the original bid. 

“The public line is that new homes never sell with a price cut, but now that’s just nonsense,” says Dell, founder of Black Brick. “It’s a measure of how much power buyers have: in nearly 20 years the only market as good for buyers as this one was the few months following the financial crisis [of 2008].”

In super-prime central London, beloved playground of the world’s richest entrepreneurs, aristocrats, financiers and oligarchs, the haggling is in full swing — even for homes in new developments — as trophy-home sellers across Mayfair, Kensington, Belgravia, Knightsbridge and Chelsea drop their prices to achieve a deal. 

In part, it’s because the buyer pool is diminished. Non-doms, considering where to buy their next home, are seeing less reason to pick London now their tax perks will be removed under measures set out by the new Labour government. Added to this, borrowing costs are high; an inflationary October Budget suggests they will remain so. And, in friction to the nationwide home shortage, unsold new homes in central London are close to record levels, as transactions stall. In the three months to September, 102 homes sold for £5mn or more in London, down from 155 one year earlier, according to Savills, which predicts prices will fall next year. 

Dell lists other recent deals she has struck for clients this year: nearly £3.5mn off a £13.5mn Knightsbridge town house and £475,000 off a £2.35mn Chelsea apartment; £1mn off a £4.75mn mews house near Sloane Square. 

Never hasty to call a market downturn, selling agents for the upper tier of the sector are nonetheless steeling themselves. “The probability of our market improving in the next six to 18 months is very slim,” says Jake Russell, head of sales at Russell Simpson, a central London estate agent that has sold 55 homes for more than £5mn since March. “Sellers are becoming acutely aware of that.” 

A year ago, he listed a home for “just under £20mn”. By April, when it had received 40 to 50 viewings but no offers, he arranged a meeting with the sellers. Russell advised they drop the price by 15 per cent. They agreed; several prospective buyers who had viewed the home previously made offers; within a few days it had sold. 

Russell’s clients — downsizers — are now renting. They plan to buy but are in no rush, anticipating lower prices if they wait. Thinking like this further depletes the buyer pool, increasing the leverage for those who are willing to transact now. 

The longer we were [looking] the more homes came on the market; later in the year prices made more sense. I was in no rush and I felt more and more powerful

Annabel is in her early thirties and recently bought her first home. Over the course of 2023, she felt her bargaining position strengthen as the number of suitable properties grew and their prices fell. “The longer we were [looking] the more [homes] seemed to come on the market; later in the year [asking] prices made more sense. I was in no rush and I felt more and more powerful,” says Annabel, who declined to give her real name. 

She saw a dozen homes, had offers accepted on two — each time, 10 per cent below the list price — but pulled out of both purchases because of surveys or delays from sellers. Finally, more than a month after viewing it, she offered £375,000 less than the £2.45mn asking price for a house in St John’s Wood. The seller accepted immediately.

On a recent November evening in Sautter of Mount Street, Mayfair’s celebrated cigar store, talk is of a changing mood. The rarefied smog (Sautter enjoys an exemption from the UK’s smoking ban) envelops a mostly male, international crowd, including a high-end tailor and a cigar shop owner from Hong Kong, both in their early thirties, a plump fiftysomething man with a thick Midwest American accent and 29-year old Charles Jerbus, originally from France.

Between puffs on a short fat cigar, Jerbus explains how the tax changes and new Labour government are reshaping his social set. His parents, who arrived in London from Dubai in 2020, relocated from their Belgravia town house to Zurich last year when his mother, who “saw the [tax] changes coming”, took a new job there. “My social circle is leaving, it really accelerated after the election,” he says. Those departing include some of the leading classic car dealers, Jerbus’s profession, despite London’s prominent role in the sector.

This year, 9,500 of those with £1mn or more of investable wealth are projected to leave the UK, double the number who left last year and six times the 1,600 who left in 2022, according to London-based Henley and Partners, which advises wealthy individuals on their residency choices. Only in China are they leaving faster. 

One of this UK number, a Brit by birth, now a non-dom and working in private equity, who is currently in the process of securing himself and his wife passports for another country, sold his £24mn central London home shortly before the Budget. Paul Welch arranged the man’s mortgage to buy the home two years ago, through his London-based company Million Plus Private Finance. “Once upon a time, a client like this would keep hold of their home, refinancing as a buy-to-let,” Welch says. “Today, with mortgage rates so high they are much more likely to sell.” Last year he arranged 22 London home mortgages for more than £5mn; in 2022 the number was 14. So far this year, he has arranged three. 

9,500Those with £1mn or more of investable wealth projected to leave the UK this year; in 2022, the number was 1,600 (Henley and Partners)

Some non-doms leaving the UK will keep their homes to retain a London base, according to Lucian Cook, head of residential research at Savills. “But many who had been planning to move to London — as non-doms — and buy a home will now decide not to, so demand for [high value] homes will fall.”

Non-doms are not Welch’s only clients looking to sell their London homes. One, an elderly woman who owns a £5.5mn town house with a £2mn mortgage, has been renting it out for more than a decade. Last month she put the home up for sale. “The rent no longer covers the cost of the mortgage. When she can get more than 5 per cent on the [proceeds of the sale] in the bank, selling is a no-brainer,” says Welch. 

In the six weeks to the end of November, the best mortgage deal Welch could find for clients wishing to borrow £10mn at 60 per cent loan-to-value (LTV) increased from a rate of 3.68 per cent to 4.19 per cent. 

Several factors suggest high rates could continue. First, the Budget was judged to be inflationary by both the Office for Budget Responsibility and the Bank of England. Second, “Trump’s presidential victory signals looser US fiscal policy, meaning tighter monetary policy [to control inflation] increasing pressure on the BoE to follow suit,” says Andrew Goodwin, chief UK economist at Oxford Economics. Three weeks after the Budget, prices in swaps markets implied a fall in the UK base rate to 4.1 per cent by the end of next year — half a percentage point higher than the pre-Budget forecast of 3.6 per cent.

Slower than expected falls in interest rates signal borrowing costs are likely to stay higher for longer, reducing buyer budgets and willingness to borrow. But sellers, mindful of the forces holding buyers back, may see a clearer case for cutting prices to lure them into a deal. 

Standing proud on Whitehall is the Old War Office, centre of operations during the second world war, and later the backdrop for the 1956 Suez crisis and the 1960s Profumo scandal — then, in September 2023, reborn as 85 upscale residences managed by Raffles Hotel.

Today, it is one of 15 completed high-end developments in central London with homes still for sale — including 60 Curzon in Mayfair, The Broadway on the Westminster site that once housed New Scotland Yard, and Belgravia’s Peninsula Residences. Apartments in One Kensington Gardens have been selling since 2015.

Central London’s total unsold new homes have averaged 411 over the past five years, more than double the 192 of the preceding five years, according to Molior, which specialises in London new-build data (this counts developments larger than 20 units — more than 90 per cent of new homes, it estimates). 

There may be few developments in the pipeline — since 2014 stamp duty increases curbed demand for prime central London homes, developers have avoided starting new projects — but even at last year’s sales levels, the current rump of unsold homes would take roughly 18 months to clear. And, with average sale prices since the start of last year at £3,538 per sq ft, according to Molior, that would be no mean feat.

“Last year, unsold homes were at their highest since we started collecting data in 2009,” says Sam Long, senior research analyst at Molior. “There is an imbalance between supply and demand.”

Those who are in a position to buy are taking full advantage of their strong bargaining position. Many are from the US, where the authorities tax citizens’ worldwide income wherever they are based. “Non-dom regime or no — it doesn’t make any difference,” says Welch, who highlights that the buyer of the £24mn Mayfair home was an American entrepreneur.  

“While there has been no tsunami of fleeing Democrats arriving since the election, I have plenty of US customers on my books who are looking to buy,” says Roarie Scarisbrick of Property Vision, a London-based buying agent.

In Kensington, Chelsea, Holland Park and Notting Hill, British, Europeans and Americans dominate — typically families whose primary home and workplace is London and who plan to be here for the long term, says Russell. Cook adds that this group of “necessity” buyers will form an increasing share of transactions in the coming years. 

Other buyers from abroad emerged from the October Budget feeling friskier than non-doms. The buyer whom Dell helped negotiate £3.5mn off the £13.5mn Knightsbridge town house is from the Middle East, and will use the home only for holidays. “They won’t spend enough time there to be judged a non-dom,” she says. Several others of her clients are buying for children who plan to make London their home. Neither group will be fazed by the 2 per cent stamp duty increase on second homes, she adds. 

The same is true of many of Russell’s buyers, he says, looking down the list of £5mn-plus homes his agency has sold since March in Mayfair, Belgravia and Knightsbridge. “Indian, Greek, Swiss, Lebanese, Chinese, Turkish, Nigerian, French, Portuguese . . . ”

In May, a company controlled by Natasha Poonawalla, an executive director at the Serum Institute of India, the vaccine manufacturer owned by the Poonawalla family, spent £42mn on a building in Mayfair’s celebrated Grosvenor Square. This is not the only recent purchase by Poonawalla, who could lose the tax benefits provided by the non-dom regime when it ends. Last December, she and her husband Adar, who leads the family business (but who spends too little time in London to be covered by non-dom rules), spent about £138mn on a 25,000 sq ft home near Hyde Park, London’s second most expensive home sale ever. 

At roughly £5,520 per sq ft, the home near Hyde Park hardly qualifies as a bargain. By contrast, the Poonawallas paid c£1,560 per sq ft for the Grosvenor Square building (it had not had a full-time tenant for several years and was marketed for commercial use). 

A 10-minute walk to the east of Sautter cigar shop, the gathering for the illumination of New Bond Street’s Christmas lights seems to signal bright prospects for London’s premium home market.

Beside a pop-up bar, four carol singers belt out an arrangement of “O Little Town of Bethlehem”. This being New Bond Street, the bar is a converted 1934 Rolls-Royce coupé whose customers sip champagne behind velvet ropes. The carol singers, who sound like they belong in the opera, are impeccably dressed in black tie. “It feels as busy as this time last year, for sure,” says the woman who chaperones them, a clipboard clutched against her plush winter coat.

Outside the store of Chanel, the sponsor of this year’s lights, a large crowd gathers to listen to representatives of a local business association lauding a bumper Christmas season for local retailers. The street is rammed.

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Scarisbrick is unsurprised; he reckons the most affluent are staying put, and holding on to their central London homes. “Yes, some [wealthy residents] are considering their options, and having an exploratory [relocation] tour of Milan or Dubai,” he says. “But what they’re not saying is: ‘holy shit, I have to get rid of my house’.”

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