2025, A Year of Marginal Disruption in Prime Property - Aria Finance
In this thoughtful LPF Insider analysis, Lucy Waters, Managing Director of Aria Finance dissects the UK Autumn Budget through the lens of the prime and super-prime property market. Written in the wake of what many in the industry viewed as a missed opportunity for meaningful reform, Lucy unpacks the impact of new tax measures on high-value homes, landlords, and investor confidence. From the so-called ‘mansion tax’ to changes in property income taxation, the piece explores how incremental policy shifts are shaping behaviour in an already cautious market. While the budget avoided catastrophe, it left many wondering what real purpose the changes serve. This is a must-read for those navigating the evolving fiscal landscape of luxury property in 2026.
Could we have had worse outcomes for prime property after the November 2025 budget? Certainly. Yet, after so many marginally significant changes, the positives are difficult to pinpoint as we head into 2026.
2025 was a year of caution and inertia in the prime property market. Price growth stayed flat to negative as supply outpaced demand, creating favourable conditions for discerning buyers with capital to utilise.
In Prime London, buyers leveraged their position to negotiate substantial discounts, with 79% of transactions occurring at discounted prices (Q3 data). Net listings grew as prime property tended to remain on the market for longer. Chain breaks were more frequent amid uncertainty in the broader economy.
A small positive has been a slow improvement of mortgage rates throughout the year. Yet overall, the prime market remained dominated by strong cash buyers and those with access to flexible financing solutions that could move quickly when opportunities arose.
The search for significance in the Autumn Budget
Before the Autumn Budget rolled around, there were signs of cautious optimism from prime property investors, however until clarity was achieved, there would be very little forward momentum.
When Chancellor Reeves delivered her budget (if we can forget the embarrassing OBR oversight), most of the feared headline-grabbing disasters were avoided, and still nothing sat quite right. Along came two tax measures that left the prime market asking, “What was the point of that?” These changes seemed just disruptive enough to demand attention without being substantive enough to justify the disruption.
The main Budget-related impact in the prime property market has been an annual High Value Council Tax Surcharge on properties over £2m starting in April 2028, a so-called 'mansion tax'. On paper, it's manageable: £2,500 per year, equating to £208 per month in additional costs at the lowest band. In reality, it seems unnecessarily petty when, in the grand scheme of government revenue, the tax raised is fairly negligible (projected at just £430m per tax year). Meanwhile, calling it a 'mansion tax' is something of a misnomer in prime London, where £2m barely secures a two-bed property in certain postcodes.
For many, the impact is likely to be uncomfortable at worst. However, those who have inherited property may feel it more acutely as their comparative income is much lower than the property value. There is talk of deferring these charges until sale or succession, but even then, the outcome is a slow erosion of wealth with no material benefit. Ultimately, it's not the higher council tax that grates. It's the direction of travel. Taxing wealth, even modestly, sets a precedent that feels unnecessarily punitive rather than relevant and harms investment appetite.
Layer on the 2% increase in tax on property income from 2027, and landlords in super prime areas like Kensington & Chelsea, where around 46% of homes are privately rented, are now facing both the mansion tax and a higher income tax. Far from being the silver bullet to raise taxes from high-net-worth individuals, these kinds of costs are typically passed on to renters. However, the Renters Rights Act limits the extent to which landlords can do so.
Opportunities Ahead
None of the measures announced at the Autumn Budget will break the market. But they won't help it either. The Valuation Office Agency will conduct a revaluation exercise in 2026 to determine eligible properties for the High Value Council Tax Surcharge, introducing additional uncertainty around the £2m price point until an outcome has been achieved. Properties then valued under £2m will likely see increased investor interest as the near-prime bracket becomes more appealing.
It’s not all negative, however. The abundant supply of prime properties has created a genuine buyer's market for those with capital and conviction. Prime rental growth continues to show resilience as properties with strong rental fundamentals and higher yields will move quickly when opportunities arise, particularly where financing can move at pace. The flight to quality remains a defining trend as buyers gravitate toward properties that offer both stable returns and long-term value retention.
Taking Stock
The core frustration is that each change this year was significant enough to be disruptive, yet none felt worthwhile. We've spent 2025 stopping, recalibrating, and adapting to measures that made the prime property ecosystem marginally more tiresome to operate within without delivering value in return.
We avoided disaster. But we didn't gain anything meaningful either. That's the peculiar dissatisfaction hanging over prime property as we turn the page to 2026.
Get in touch
Aria Finance
Website: https://www.ariafinance.co.uk/
Email: info@ariafinance.co.uk
Phone: 020 3839 9998
Second Floor, Edward Hyde Building,
38 Clarendon Road,
Watford, WD17 1JW