Non-dom reforms blamed for collapse of Harrods luxury property arm
The collapse of department store Harrods’ luxury property arm was due in large part to the government’s abolition of the non-dom tax regime, estate agents have said.
Harrods Estates, which opened on the shop floor in 1897, has announced the closure of its only remaining office in Knightsbridge.
London estate agents said the collapse of the luxury property vendor is proof that the capital’s allure as a prime residential location for the global elite is waning.
Residential director Shaun Drummond said the the closure of Harrods Estates’ last outpost would enable the department store to focus on its “core proposition” of luxury retail.
The luxury estate agency previously had additional offices in Mayfair, Chelsea and Kensington.
Drummond told PrimeResi magazine: “Earlier this year, Harrods Estates made the very difficult decision to close its operations.
“This decision has been made in line with the wider Harrods Group strategy to focus on its core proposition of luxury retail, catering for clients and customers within the Knightsbridge store and online.”
End to non-dom regime played ‘major part’ in Harrods demise
Roarie Scarisbrick, a director at prime property advisors Property Vision, told Morning Wire the end to the non-dom regime played a “major part” in the collapse of Harrods Estates.
The non-dom tax status had allowed UK residents whose primary home was outside of the country to only pay tax on money made within the UK.
But at the 2024 Budget, Chancellor Rachel Reeves replaced this regime for a residence-based system which taxes all long-term residents on their worldwide income, and introduced a four-year “grace period” for the changes.
As many as 2,000 wealthy non-doms fled the country last year in apprehension of the tax changes, according to one report, with economists warning the government is underestimating the impact of the regime’s end.
Scarisbrick said: “There is no doubt that [prime London] transaction volumes have fallen in the last couple of years due to lots of factors, but not least of which would be the non-dom rule changes.
“Inevitably, the most international parts of London have been most affected, including Knightsbridge, where the Harrods flagship was based.”
James Holroyd, also a partner at Property Vision, told Morning Wire the removal of the non-dom status will have contributed to Harrods Estates’ collapse, though the changing profile of London’s luxury property buyers is also to blame.
“There were a lot of Middle East and Indian client bases and an Eastern European client base, and it’s probably not just non-doms.
“It’s probably also [due to] changes in the profile of people who have been buying in that market over the last little while.”
Harrods Estates offered boutique Russian and Middle Eastern desks before its closure, which offered translation services for clients from those areas of the world.
American housebuyers have played a growing role in London’s prime property market in recent years, with a number of high-profile figures – including Star Wars creator George Lucas – having bought houses in London as part of the “Trump effect”.
London’s luxury property slump
London estate agents say the capital’s prime residential market is in a long-running slump.
There were 31 per cent fewer sales for prime properties – which account for those in the top five per cent of the market – this February than in the year before, according to property data firm LonRes.
Estate agents have also blamed the 2014 reforms to stamp duty – which pegged the tax to purchase price – for the ailing health of London’s high-value property market.
Rosy Khalatschy, a director at luxury estate agency Beauchamp Estates, told the Times the sexual abuse allegations facing Harrods’ former owner, Mohamed Al Fayed, may also have hurt its property business.
Knightsbridge, where Harrods Estates’ last office was located, has declined in popularity in recent years compared with neighbouring Mayfair and Belgravia, she said.
A spokesperson for Harrods told the Times: “Harrods Estates made the decision to wind down its operations, in line with the end of its lease.
“The office closed as planned following the end of the lease at the end of March, and plans have been put in place to ensure there will be no impact on Harrods Estates current clients.”