Luxury housing markets regain momentum

The prospect of Andy Burnham's move into Downing Street and England's progress in the World Cup provided the biggest lift to consumer confidence since 2023 during July, market research group GfK reported on Friday. 

Public confidence is now higher than it was at the start of the Iran war. Whether that's down to a generational win at the Azteca or the opening of Number 10 North, history suggests the prime minister has a two- to three-month honeymoon period in which to tackle some sizeable gaps in his policy agenda – particularly when it comes to reconciling his pledges with the fiscal reality. Inflation has risen faster than expected since Rachel Reeves announced her Budget last year, eroding the real value of government spending by about £24 billion, according to National Institute of Economic and Social Research (NIESR) figures. This will need to be plugged via a mix of spending cuts and tax rises. 

From a housing perspective, so far we've learned a lot about what won't happen. Rent controls are still off the table, returning Housing Secretary Angela Rayner told the BBC last week. A much talked proposal to replace council tax and stamp duty with an annual property value tax also won't be happening – at least not in the upcoming Budget, the PM said on Monday. 

Gauging intent

Rayner also confirmed that the government will retain its target of building 1.5 million homes this parliament, despite the chances of achieving it now being vanishingly small. Targets, even when consistently missed, can be useful for gauging intent, so this suggests a degree of continuity from a policy perspective. As my colleague Ollie Knight has pointed out, the reforms that matter most to development viability and housing delivery, including changes to the National Planning Policy Framework (NPPF) and various other related planning reforms, are already underway. Indeed, Rayner was instrumental in shaping many of them during her previous tenure.

Burnham has also pledged to lead the "biggest council-house building programme since the post-war period". Money and in-house skills will be among the biggest challenges, but the Resolution Foundation had a go at sketching out how the former could work on Friday. It suggested ringfencing the £39 billion Social and Affordable Homes Programme (SAHP) exclusively for social rent homes over its ten-year lifespan, which would increase the supply of social rent homes, but would leave a 5,000 homes a year shortfall in the programme’s overall target of building 300,000 affordable homes by 2036.

Allowing private developers to build fewer social rent homes in a period when they face weak demand for private sales in exchange for more affordable rent units could increase supply by 2,000 affordable homes a year. Finally, utilising the as yet untapped £2.5 billion low-cost loan facility in the National Housing Bank to stimulate affordable housebuilding by housing associations could increase supply by another 6,000. Together, that would mean building 66,000 affordable homes a year, matching recent highs and remaining within the government's budget. But it would still fall well short of the post-war era, when local authorities themselves were building 100,000 homes a year.

There are still big question marks over how much construction local authorities themselves could undertake. The FT covers a private memo from Nick Williams, a former infrastructure adviser to Sir Keir Starmer who is now advising incoming Cabinet Minister Louise Haigh, which argued for nationalising Vistry in the way the government recently took control of British Steel. “There have been no discussions between Vistry and the government on this matter," a Vistry spokesperson told the paper. 

Growth strengthens

Conditions are improving in the world's luxury housing markets, new Knight Frank forecasts show. Average prime residential price growth across 20 global cities is forecast to rise from 1.6% in 2026 to 2.2% in 2027. 

While growth remains modest by historical standards, average growth is expected to strengthen in 2027 as a number of cities currently in negative territory move back into positive growth, while many of the strongest-performing markets continue to record solid price gains. Seoul is forecast to be the strongest-performing city in both years, with prime prices expected to rise by 11% in 2026 and a further 6% in 2027. A prolonged shortfall in new housing supply continues to underpin the market, while wealthy domestic buyers and overseas Koreans increasingly favour trophy assets in the capital's most desirable districts.

Tokyo remains among the top-ranked cities across the forecast period, holding second place in 2026 and sharing second place with New York in 2027. Although rising interest rates are beginning to temper activity, demand remains robust and is expected to support continued growth.

Improving sentiment

Hong Kong ranks third in 2026, with prime prices forecast to rise 6.5%. Improving sentiment and a growing preference for high-quality developments in prime locations are supporting activity at the top end of the market. While values remain below their previous peak, this leaves scope for further recovery over the next two years.

Outside Asia, New York and Milan complete the top five. In New York, luxury buyers remain active despite the introduction of Mayor Zohran Mamdani's new tax on high-value second homes. Luxury sales activity continues to strengthen, with transactions above $20 million rising 25% year on year and those in the $10–20 million segment increasing 38.6%, according to Compass' second-quarter Manhattan market report. This resilience is supported by favourable long-term wealth trends: North America is forecast to account for 43% of the world's ultra-high-net-worth (UHNW) population by 2031, up from 37% today, providing a growing pool of wealth to support activity at the top end of the market.

Against this backdrop, New York is forecast to move into joint second place with Tokyo by 2027, overtaking Hong Kong. Milan also retains a top position in both years, reflecting its growing appeal among international buyers. Strong wealth inflows and rising global interest continue to support demand, while a pipeline of high-end developments, serviced residences and premium refurbishments is helping to broaden what has traditionally been a limited supply of luxury homes. You can read more here.  

In other news...

Number of millionaires in UK falls to lowest since financial crisis (Times).