Second-home purchases across London have plunged, with fresh data showing prime postcodes hardest hit as higher stamp duty and looming council tax premiums sap buyer appetite. Jefferies London found that additional-property transactions tumbled 42% citywide—and an eye-watering 51% in prime areas—over the past 12 months.
Steep fall in prime market activity
Land Registry figures analysed by Jefferies show total London transactions dropped 20.5% year on year, driven by a 41.6% fall in “Category B” sales, which include second homes and buy-to-lets. In prime London, overall activity fell 27%, while Category B purchases sank to just 9.1% of sales compared with 13.7% a year earlier.
Jefferies founder Damien Jefferies said: “Successive tax hikes on second homes have significantly dampened appetite. In the prime market, second-home purchases are now running at little more than half the level seen just a year ago.”
Tax changes squeeze buyers and landlords
Investors face a 5% stamp duty surcharge on second homes—up from 3% since October 2024—plus new powers for councils to levy a council tax premium from April 2025. Talk of replacing stamp duty with an annual homeowners tax has added uncertainty. “Introducing a new annual property tax targeting high-end buyers could risk deterring even more purchasers,” Jefferies warned.
For property investors, these measures erode returns and complicate portfolio planning. “Each extra layer of tax pushes investors to reconsider London altogether,” said mortgage broker Karen Lewis, who advises buy-to-let clients on prime acquisitions. The National Residential Landlords Association (NRLA) has also flagged the risk of reduced rental supply if high-end investors retreat.
Sharp postcode-level declines
Jefferies’ postcode analysis reveals that six prime districts, including Marylebone’s W1D and Mayfair’s SW1A, recorded zero second-home transactions in the past year. Kings Cross (WC1X) saw a 94.6% drop, while parts of Soho and Vauxhall suffered falls above 85%.
Editor’s view
London’s prime market has long thrived on domestic and international investment, but the tax squeeze is testing that reputation. If ministers proceed with an annual property levy to replace stamp duty, will global capital simply look elsewhere? For investors balancing rental yields against rising costs, the next Budget could determine whether London remains a magnet or a cautionary tale for high-end property investment.
