London’s prime rental market has been given a boost recently due to uncertainty centring on new rules for non-doms, which could make the UK a less attractive destination for wealthy foreign investors.
As more of them keep their options open, demand for high-value lettings properties has risen.
The number of tenancies started above £1,000 per week in the final quarter of 2024 was 8% higher than the same period in 2023, Knight Frank data shows. Above £5,000 per week, in the so-called super-prime price bracket, there was an 11% increase.
Meanwhile, there was a 12% drop across the wider market due to a lull in activity towards the end of the year following the general election and Budget.
“We currently have our largest ever pipeline of super-prime tenancies,” said Tom Smith, head of super-prime lettings at Knight Frank. “With the non-dom tax changes limiting ultra-high net worth individuals to four years in the UK, a lot of clients have elected to rent as opposed to buy.”
Under the old regime, non-doms didn’t pay tax on their non-UK income for up to 15 years under a set of rules that date back more than 200 years. Around 74,000 non-doms contributed £8.9 billion in UK taxes in 2022/23.
The government’s new residence-based scheme from April proposes a four-year cap, which makes it less attractive than other countries including Italy, where foreign investors can pay an annual flat tax for a maximum of 15 years.
The proposed changes mean demand is more subdued in London’s sales market, as we explore here.
Meanwhile, average rental value growth in prime London has continued to narrow as stock levels climb after several years of shortages due to tighter landlord regulations, higher mortgage costs, a growing tax burden for buy-to-ley investors and the disruption of the pandemic.
The number of new listings across prime central and outer London was 3% higher in 2024 than in 2023, Rightmove data shows.
Average rents in prime central London increased 0.6% in the year to January, which compares to a rise of 7.2% recorded this time last year. The increase was 0.2% below £1,500 per week and 1.4% above that level, reflecting strengthening demand at the top end of the market.
In prime outer London, the increase was 1%, which is the narrowest since July 2021.
