London’s Luxury Property Downturn Looks Set to Get Even Worse

London's prime luxury property market is experiencing a significant downturn, with prices over 20% below peak levels, exemplified by developments like 60 Curzon struggling with unsold units and insolvency. This decline is being exacerbated by the recent removal of tax perks for non-domiciled residents, which is prompting an exodus of wealthy individuals and further diminishing the crucial pool of high-net-worth buyers. This trend suggests a continued challenging outlook for the city's luxury real estate sector as the client base thins.

Analysis

London's prime property market is experiencing a severe and protracted downturn, with prices having already fallen by more than 20% from their peak. The distress is exemplified by specific high-profile failures, such as the insolvency of the '60 Curzon' development in Mayfair, which has failed to sell half of its units nearly a decade after its inception. This pre-existing weakness is now being significantly intensified by a key policy change: the removal of tax advantages for non-domiciled residents. This fiscal tightening is directly triggering an exodus of the super-wealthy, fundamentally shrinking the buyer base for luxury assets. The direct consequence is a deteriorating outlook for the sector, as the pool of deep-pocketed clients, crucial for market liquidity and price support, continues to diminish.

Key Decisions for Investors

• Investors with existing long exposure to London-focused luxury developers or real estate investment trusts should reassess their positions, as the removal of non-dom tax perks represents a structural, rather than cyclical, headwind to demand.
• Extreme caution is warranted for those considering new investments in this sector; the confluence of falling prices and a shrinking buyer pool suggests a high probability of further downside before the market finds a new equilibrium.
• For those with a bearish outlook, the accelerating downturn fueled by the non-dom exodus may present opportunities to short UK-based luxury property developers or related financial instruments with heavy exposure to prime London real estate.