Prime London Property Prices Fall Amid Mansion Tax Plans

London's prime property market has experienced its steepest decline in over four years, with average prices falling 4% year-on-year amid speculation about a new mansion tax proposed by Chancellor Rachel Reeves. The tax, potentially a 1% levy on property values exceeding £2 million, could affect more than 150,000 high-value homes in England and Wales, leading to a significant cooling of demand and increased rental activity in luxury segments. Analysts warn that such a tax could have unintended consequences, including a reduction in the number of luxury properties and financial strain on long-term homeowners, particularly pensioners whose incomes may not match property value increases. Historical context shows that similar tax proposals from over a decade ago, although never implemented, led to stamp duty increases that dampened the prime market, which has yet to fully recover. The mansion tax debate also raises concerns about its disproportionate impact on London compared to other regions, with equivalent thresholds in other parts of the UK being considerably lower, potentially fueling political tensions. Overall, the market's response highlights the delicate balance between fiscal policy and housing market stability, as the government seeks to address a substantial fiscal deficit in its upcoming Budget.