US Buyers Dominant in PCL as Government Sends Mixed Signals to Foreign Investors
February 2025 PCL Sales Index: 5,262.5
February 2025 POL Sales Index: 276.8
3 minutes to read
The relationship between the UK and US has come under renewed scrutiny in recent weeks.
One area of focus is how much power each country wields as they seek a resolution to the war in Ukraine.
The rules of realpolitik mean the US is setting the tempo as a ceasefire deal gets closer, which is the same power dynamic seen in the world economy.
The global number of ultra-high net worth individuals (assets of US$10m+) increased by 4.4% in 2024 compared to 2023, the Knight Frank Wealth Report 2025 showed last week. The rise was led by North America, where the number grew by 5.2% compared to 0.9% in the UK.
Almost 40% of the world’s wealthy now live in the US, the report found.
The statistics underline the dominance of the US but some of that capital will inevitably find its way into the prime London property market.
The number of Americans applying for UK citizenship rose to the highest level on record last year, according to the UK Home Office this month. The polarising effect of the US election undoubtedly played a part, with traffic to Knight Frank’s website last November five times higher than the same month in 2023.
US nationals accounted for 11.6% of overseas buyers in prime central London (PCL) in the final quarter of 2024, which was the largest group ahead of the Chinese (8.1%), Knight Frank data shows. Indeed, they overtook the Chinese to become the largest group last year in PCL, accounting for 9.3% of sales to overseas buyers compared to 5.6% in 2019.
The effective discount for US dollar-denominated or pegged buyers is around 38% in prime central London compared to July 2014, a figure that takes currency and property price movements into account.
However, the number has narrowed over the last two months as the US dollar has got weaker due to signs of difficulty in the American economy.
Consumer confidence and economic data in the US has disappointed in recent weeks while inflation expectations have risen. Meanwhile, the S&P 500 stock market index had eroded the gains made since November’s election during trading last week, against a volatile background of trade tariff uncertainty.
Unfortunately, UK mortgage rates are not immune to the consequences of unpredictable US tariff policy, or, as we also saw last week, plans by the German government to boost defence spending.
However, the UK could benefit as a location for overseas investment if it avoids getting caught in the crossfire of a trade war between the US and the EU by playing the ‘stability’ card.
Which is why it feels like unfortunate timing to be replacing the country’s non dom tax regime with something less competitive.
The Finance Bill is nearing the end of its journey through Parliament and the government has shown no indication it sees merit in an Italian-style flat tax or that it will address investor concerns about subjecting overseas assets to UK inheritance tax.
Demand for prime London property comes from a broader base of buyers than non doms, but the UK is arguably sending the wrong message to the rest of the world at the wrong time.
Average prices in prime central London fell 1.1% in the year to February, following the largest monthly dip (-0.4%) since December 2023.
Meanwhile, prices increased 1.5% in prime outer London, as demand is supported by equity-rich, needs-driven buyers.
While the number of transactions in prime outer London rose by 3% in the year to February compared to the previous 12-month period, in the more discretionary and international PCL market, there was a 5% decline.
The Chancellor’s Spring statement later this month is an opportunity to soften the government’s message towards overseas investors. Will she? Based on recent history, it feels unlikely.