London is home to 230,000 millionaires, which may come as no surprise given its status as Europe's premier destination for upscale real estate.

A recent surge in demand for three residential categories—luxury, ultra-luxury, and exceptional—is highlighted in CBRE's first Luxury Real Estate study, which explores the effects of the luxury development market on the broader real estate market.

The 'Luxury' price point (£1,440 per square foot) accounted for little over 60% of home sales over the last three years, which is lower than the longer-term average of 70% between 2014 and 2020. On the other hand, the proportion of sales for "exceptional" residences (£3,090 per square foot) has increased, more than doubling from 8% in 2014–2020 to 17% in 2021–2023. This notable increase in transactions at the upper end of the market underscores London's position as a major worldwide residential investment destination and a cornerstone of real luxury living.

The UK has always been attractive for residential investment, particularly overseas buyers, due to its historically favourable “remittance basis” tax regime, which is one of the most appealing in the world. This has had a particular impact on high end pricing in London, where prices per sq ft are significantly higher (£2,320) when compared to cities like Paris and Amsterdam. Amsterdam is becoming more popular among high-net-worth individuals (HNWI) due to a tax advantage that allows expatriates to receive 30% of their gross salary tax-free for the first five years, contributing to a circa 40% increase in millionaires in the city between 2013 to 2023. Although it remains expensive by comparison to other cities. It does, however, have appealing tax advantages for individuals looking to establish companies in The Netherlands.

Our current Government has stated its intentions to ensure the UK is an attractive jurisdiction to allure (and retain) ultra-high net worth (UHNW) individuals. However, the Chancellor, Rachel Reeves, delivered her first Budget last month and the announcement of a rise in inheritance tax is sure to have implications on the HNWI market in London and the UK more broadly.

The taxation for non-UK domiciled (non-doms) individuals will undergo significant changes, with the remittance basis of taxation being abolished from April 2025. Abolishing the non dom tax might not be as detrimental as initially thought, as the remittance basis was complex and costly, but its impact will surely be felt.

The positives are that from April 2025, new UK residents who haven't been tax residents in the last ten years can bring their offshore income and gains to the UK tax-free for the first four tax years, a big plus for those seeking education in the UK.

Additionally, non doms already residing in the UK can use the 'Temporary Repatriation Facility' from 6 April 2025 to remit foreign income and gains at a special tax rate of up to 15%, as opposed to the current rate of up to 45%, with a three-year period to decide and no limit on the amount.

Exempting second homes from changes to Capital Gains Tax (CGT) should boost investor confidence, but higher stamp duty on second properties may act as a deterrent given its increase from 3% to 5%.

And when we look beyond the luxury market, the increases to Stamp Duty Land Tax (SDLT) on second homes is still material. A £300,000 second property now incurs an additional £6,000 in tax, and a non-UK resident purchasing a £5m second home faces an SDLT charge of £861,250, up from £761,250. This increased tax burden materially affects private landlords, who own most second homes, and could dissuade would-be landlords from entering the market, creating a likely affect on the supply of new homes.

Although a SDLT rise for overseas buyers was anticipated, few expected it to apply broadly to all second home buyers. In reality, we will see this increase being absorbed and reflected in asking prices.

Other cities in Europe are coming to the forefront for HNWIs, such as Milan and Geneva. All offer favourable tax regimes and attractive climates, bringing in the question - does London have the power to remain Europe’s top choice for HNWI’s?

It has always been expensive to buy a home here and that hasn’t changed. There are few cities ahead of, or directly comparable to London and it remains the bellwether.

A prime focus for investors, London is recognised as Europe's financial centre and a leader across many industries including media, sports and entertainment to name a few. Also in demand are its prestigious private schools and private health services, however the former may now come into question with the removal of VAT exemptions and business rates relief.

CBRE’s sales data points to London’s resilience. This year, we’ve recorded a 33% increase in total GDV for agreed sales. A large percentage of London’s luxury transaction volumes are still coming from the most affluent boroughs including Kensington, Chelsea and Westminster, collectively accounting for 77% of transactions. This figure has remained the same since pre-pandemic, demonstrating that appetite at the top end of the market seldom moves from these mainstay locations.

Whether the latest Government policy will have an impact on HNWI interest in London remains to be seen. But what our report resoundingly proves is that our capital holds a distinct position and has a significant influence on the residential real estate market globally, underpinned by the luxury pricing achieved per sqm compared to its European counterparts.

We must continue to bolster London’s status and maintain its enduring appeal as the luxury residential destination of choice, or else we risk losing HNWIs – and with that, a loss of personal and business investment in our capital.