Late last year, celebrities packed a party thrown at Fatima and Eskandar Maleki’s luxury mansion in London’s Mayfair neighbourhood. The occasion, in part, was meant to showcase the sprawling townhouse the hosts had been trying to sell for quite some time without much success.

A few months after the bash, the art collector-oil tycoon couple eventually found a buyer from the Middle East, but only after agreeing to a hefty discount: 33 per cent below the property’s original asking price of £40 million (S$67.6 million).

It took three years, a series of price cuts and a champagne-soaked soiree to push the deal over the line for a home that otherwise might’ve been snapped up within weeks during the heyday of London’s luxury housing boom about a decade ago. The £27 million discounted transaction offered a peek into signs of things to come as a slump gripped the high-end market. 

While higher interest rates have weighed on overall UK home sales, the bleak outlook for swanky postcodes is partly down to a UK budget proposal that seeks to scrap preferential tax treatment for wealthy foreign residents. The move is threatening to scare away a significant pool of investors who’ve been historically keen on the city’s exclusive properties.

“The market remains very price-sensitive,” said Alex Christian, co-head of the private office at broker Savills. “The majority of buyers remain cautious and are adopting a wait-and-see approach to see how policy plays out.”

Like the Malekis, many other wealthy home sellers in London have also been resorting to price cuts to secure deals as property valuations tumble from their peak.

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Earlier this year, a mansion on one of Kensington’s most expensive streets reached a sale deal for about £30 million, 17 per cent below its original listed price. Nestled between Holland Park and Kensington Gardens, the house was listed for £36 million by broker Knight Frank in March 2023, before being reduced to £32 million in a separate listing. Later, that price had to be slashed further.

The 19th century mansion, with seven bedrooms, a cinema room and a swimming pool with direct access to the garden, was reported to have hosted parties for guests including Henry Kissinger and former UK prime minister Margaret Thatcher when it was earlier owned by Conrad Black. The former media mogul, now a member of the House of Lords, once served three and a half years in prison after a federal jury in the US found that he illegally diverted money that belonged to stockholders to himself.

But that’s not why the property was sold at a discount.

Instead, it’s the result of London’s luxury real estate transitioning into a buyers’ market. In January, sold properties across the city’s best districts dipped below 90 per cent of their asking prices for the first time since early 2019, according to researcher LonRes. The amount of homes sold for £5 million or more dropped 20 per cent year-on-year between January and March, Savills data show – suggesting it’s a choice of price cuts or no deals for vendors in the capital.

British billionaire Bobby Arora sold a luxury townhouse in Belgravia – a neighbouring district to Mayfair – for £23.5 million at the end of last year, a discount of roughly 30 per cent from the price paid in 2013.

In signs of further gloom, such price reductions are spreading beyond the capital. Britain’s high-end country home market, which enjoyed a red-hot pandemic boom, has fast become part of the nation’s property slump.

Broker UK Sotheby’s International Realty last week announced a £10 million price cut to a Grade I-listed stately home in Denham, Buckinghamshire. Owned by British business tycoon Mike Jatania, the mansion previously housed American banker JP Morgan and James Bond co-producer Harry Saltzman. It was listed for sale over a year ago for £75 million, but failed to attract enough bidders, according to people familiar with the matter.

The Malekis’ former five-story Edwardian home has had only a handful of owners throughout its history, one of whom was acclaimed romance novelist Barbara Cartland. That shows even the best-in-class properties are struggling to secure deals. Its latest occupant will have access to a swimming pool, bar and reception areas equipped to accommodate over 100 guests – all at a £13 million discount.

A representative for Jatania declined to comment, while those for the Malekis didn’t respond to requests for comment.

Still, most buyers have already priced in the impact of the end of the tax break for foreigners in the budget proposal, according to Charles McDowell, a broker whose property firm advises rich clients on purchasing London homes. That means demand should pick up when interest rates drop and the policies of the next government become clearer, he added. 

“A change to non-doms was baked into luxury home sellers’ plans,” McDowell said, referring to those with “non-domicile” status. “Rich buyers still think London is a great place to live.”

But for some, the gloom is palpable. 

Only a handful of homes were sold for more than £25 million in London last year, including a £138 million Mayfair mansion snapped up by Indian vaccine tycoon Adar Poonawalla. The Kensington house and the Malekis’ former Mayfair mansion are likely to be two of the city’s most expensive residential deals in 2024.

“There’s a gap between buyer and seller expectations, but it’s starting to narrow,” said Charles Medina, director at broker Strutt & Parker. “There is definitely value available for buyers, especially as we see more motivated vendors in the £5 million-plus region.” BLOOMBERG