A new tax and a familiar message

The government is considering adding an extra surcharge on top of the new mansion tax for non-UK residential property owners, according to a consultation document published yesterday.  

From April 2028, owners of homes worth more than £2 million will be liable for the "high-value council tax surcharge". The proposed levy would sit on top and apply only to owners who are not UK tax residents. 

The language used by government officials in briefings to the papers offers some insight into how it views wealthy international individuals. "This tax should be applied to non-UK resident owners like oligarchs", a government source tells the Times. The levy is known inside the Treasury as "an oligarch premium", a department official tells the FT. 

Cumulative effects

As has been the case with other recent policy decisions – the direction of travel is more concerning than the levy in isolation. The language used, alongside the government's broader policy agenda, appears built on the view that the wealthy own assets in the UK with little in the way of economic contribution. But London's luxury sector contributes about £81bn to the UK economy and supports about 450,000 jobs, according to industry body Walpole. Who supports the luxury sector?

For The Wealth Report 2026, we asked experts what could threaten London’s status as a global wealth hub. One recurring concern was not any single tax rise or policy change in isolation, but the cumulative effect of years of increasingly hostile signalling towards wealthy international residents. Ministers may view non-UK resident homeowners as politically expendable, yet many of the recent policy shifts extend well beyond that group, contributing to a broader sense that London is becoming less welcoming to globally mobile wealth.

Affluent individuals tend to cluster, and their spending underpins parts of the economy that employ far larger groups of people, from luxury retail and hospitality to the arts, private education and professional services. If that spending begins to decline, the institutions and businesses built around it inevitably shrink too. Over time, the appeal of London as a place to live, invest and spend weakens further, creating a feedback loop that becomes difficult to reverse.

Inflation falls

UK inflation dropped to 2.8% in the year to April, down from 3.3% last month, according to official figures released this morning. The drop was largely due to a favourable annual comparison and last month's cut to the government's cap on household energy bills.
Analysts expect pressure to rise in the coming months due to the closure of the Strait of Hormuz, but the figures will help maintain the recent stability of mortgage rates despite rising government borrowing costs. Crucially, services inflation, which is watched closely by Bank of England rate setters, fell well below expectations to 3.2%, from 4.5% last month.

Housing market activity remains fairly resilient given the pressures on consumer sentiment and the fact that leading fixed rates remain above 4.5%, up from just 3.5% before conflict in the Middle East began. Asking prices climbed 1.2% in May, above the 1% long-run average, Rightmove reported on Monday. 

Downbeat agents

Estate agents are more downbeat than house price data suggests, which points to weakening activity as we move into the summer. The new buyer enquiries series in last week's RICS Residential Market Survey registered a net balance of -34% in April. While that was marginally better than the -40% reading recorded in March, it still points to subdued market momentum.

The agreed sales balance slipped further into negative territory in April and agents expect subdued conditions to persist over the coming months. Expectations for activity over the next year have also deteriorated steadily since the start of 2026.

Supply remains constrained too. New instructions were broadly flat in April, while the pipeline of future listings appears to be weakening as appraisal activity slows. Limited supply helps explain why house prices remain relatively resilient despite softer transaction activity.

In other news...

UK housebuilders suffer £8bn hit from Iran war (FT), London loses its lustre (FT), Foreign bids drive UK M&A to new highs at $192 billion already in 2026 (Reuters), and finally, Stick to fiscal rules or risk market revolt, IMF warns Labour (Times).