London's Prime Property Market Decline: A Warning Sign

The damaging economic impact of Chancellor Rachel Reeves continues to manifest across various sectors. Amplifying the errors of her predecessor, Jeremy Hunt, Reeves has implemented policies that disproportionately burden the wealthy. This has triggered a flight of capital from London's prime property market, signaling a concerning trend that reflects broader economic issues.

Decline in Prime Property Values

The Coutts London Prime Property Index for Q4 2024 indicates a significant drop in prime and super prime property values, with an average 8.9% discount negotiated on asking prices. Homes worth £10 million or more have experienced a 2.9% decline compared to Q4 2023, and 8.4% below the 2014 market peak.

Exodus of Wealthy Individuals

This discounting trend signifies an exodus of wealthy individuals from London, who are relocating to cities like Dubai or the Channel Islands. Reeves' policies, including the abolition of non-dom status and increased taxes, have created an environment that discourages high net-worth individuals from investing in the UK.

Economic Implications

The departure of wealthy individuals not only reduces property values but also has broader economic consequences. These individuals' spending, job creation, and tax contributions are lost to the UK economy.

Non-Dom Status and Economic Losses

The Adam Smith Institute estimates that ending non-dom status will cost the Treasury £6.5 billion in tax revenue and result in the loss of 23,000 jobs by 2035. This has contributed to the flight of millionaires from the UK, with only China losing more.

Government Response and Future Outlook

Despite the mounting evidence of economic damage, Chancellor Reeves has shown little inclination to change course. Only a change in leadership, with Labor Party leader Keir Starmer replacing Reeves, could potentially alter the current trajectory.

Investment Opportunities for Foreign Buyers

The declining values of London's prime properties may present investment opportunities for foreign buyers, particularly with the dollar appreciating against the pound. However, potential investors should consider the potential risks associated with future tax changes.