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Uncertainty over how the government might shake up property taxes at next month’s Budget is contributing to huge increases in the cost of renting a luxury house in London.
Luxury property experts said fears that Andy Burnham could crack down on high-value homes, along with an influx of demand from the US and the Middle East, have pushed the value of London’s “prime” rental property market to record levels.
The average cost of renting a prime home in the capital has soared by 67 per cent just this year to £4,177 per week and £217,204 per year, according to luxury estate agent Beauchamp Estates.
The letting value of a luxury flat or penthouse in London has jumped by 15 per cent this year to £101,764 per year, as the average size of these properties fell to a three-year low of 1,255 sq ft.
Beauchamp has found that seven in 10 of London’s ultra-prime households now choose to rent rather than buy, compared to six in 10 last year and 5.5 the year before.
The majority of applications received by the estate agency attribute their decision to rent to fears that Labour could hike property taxes on owned residences, it said.
Before becoming Prime Minister, Burnham had supported abolishing stamp duty and council tax in favour of a land-value tax, describing this alternative model as “aspirational socialism”.
But Downing Street officials were quick to deny rumours in July that the government was closing in on this tax change.
“The new Prime Minister has introduced an element of uncertainty with applicants concerned that Labour Chancellor John Healey might make further changes to property tax, pension tax and is expected to introduce a wealth tax in the forthcoming autumn Budget,” a spokesperson for Beauchamp Estates said.
“A whole generation of affluent households could soon become committed luxury renters,” they added.
Influx of Middle Eastern renters
London’s wealthy households also choose to rent to avoid the maintenance costs, bills, stamp duty and service charges associated with buying a home, they said.
Beauchamp Estates said that the Renters Rights Act and the end to the non-dom tax regime are to blame for significantly reducing the number of professional landlords and individual investors in London’s luxury property market.
In the first half of this year, 1,911 rentals in excess of £1,000 per week were agreed, accounting for £109m of rental income, compared to 3,814 deals in the same period in 2024.
Beauchamp Estates said it is seeing a significant drop-off in supply in London’s luxury rental market, despite a huge uptick in demand.
The number of wealthy Middle Eastern nationals seeking rentals in London has surged by 30 per cent this year as households from the region flee the Iran war, the estate agency said.
Jeremy Gee, managing director of Beauchamp Estates, said: “The Labour government need[s] to be mindful that excessive legislation and taxation are harmful to the capital’s rental market, hence the contracting supply pool.
“Households from around the world choose to live and spend their money in London and many prefer to rent rather than buy, so it is important that the Government helps the capital’s rental market to thrive and grow.”