The Stamp Duty deadline at the end of March has artificially inflated demand in London’s prime residential market last month, Knight Frank claims.
Analysis of prime Central London (PCL) activity by the agent showed the number of exchanges in March was 17% higher than last year and 7% higher than the five-year average excluding 2020.
The maximum Stamp Duty saving was £2,500 or £11,250 for first-time-buyers transacting before April, which boosted activity to a greater extent in lower price brackets, the agency brand said.
Meanwhile, exchanges above £2m were 6% down in the first quarter.
The analysis found that the number of new prospective buyers in London was 5% below the five-year average in Q1 while the number of new sales instructions was 28% higher.
Overall, average prices in PCL fell 0.7% in the three months to March, which was the steepest quarterly decline since January 2024. Prices were firmer in prime outer London (POL), a market supported by equity-rich, needs-based buyers. The annual price change on POL was 1.5% for the second consecutive month in March.
Tom Bill, head of UK residential research for Knight Frank said a lull in transactions is now inevitable, especially as the markets digest higher interest rates and Trump tariffs from the US.
Bill said: “Stock markets slumped and expectations around rates turned more dovish as markets focussed their attention on the economic damage tariffs could do rather than the inflationary risk of higher prices. Investors are betting central banks may have to cut more aggressively but that could change in coming months if inflation creeps up.
“Either way, markets were pricing in almost three rate cuts this year by the Bank of England late last week, which was up from two last Monday. Does that mean we will see headlines about Donald Trump being good news for the UK mortgage market? Whatever happens next, it’s important to remember that the tariff announcement was the start of a period of volatility not a one-time event.”
Despite the instability on financial markets, Bill said buyers and sellers increasingly know where they stand from a tax perspective.
He added: “The introduction of the Finance Bill will see new rules for wealthy foreign investors come into effect this quarter. A new residence-based scheme replaces the centuries-old non dom regime, which has also put downwards pressure on prices in PCL in recent months.
“The Government has so far ignored the concerns of lobby groups that the UK will look less competitive on the international stage for foreign investors under the new rules. The timing of its new scheme does feel particularly unfortunate given the US tariff announcements last week.
“However, a new tax landscape is taking shape in the UK, which means buyers and sellers will increasingly be able to plan.”