Greater certainty on tax and interest rates is helping to stabilise the London property market with activity picking up after a period of hesitation ahead of last autumn’s Budget, according to Chestertons’ latest Q4 Property Report.
The firm says two factors dominated sentiment in late 2025: property taxation changes announced in November’s Autumn Budget and the Bank of England’s decision to cut the Base Rate to 3.75% in December.
While neither move is expected to fundamentally reshape the market, together they have removed much of the uncertainty that weighed on buyer and seller confidence through the second half of the year.
Zoopla data shows demand softened in the run-up to the Budget, particularly in London and the South, amid speculation about higher taxes for property owners. Since then, Chestertons reports a clear improvement in sentiment, with buyer enquiries and viewings rising as purchasers who paused decisions begin to re-engage.
CONSTRICTED SUPPLY
Although supply remains tight across much of London, early signs suggest conditions are easing.
Some landlords are bringing rental properties to market, while modest price falls in certain areas are giving buyers slightly more choice and negotiating power. Chestertons expects this momentum to carry into the early months of 2026, traditionally a key period for renewed activity.
Matthew Thompson, Head of Sales at Chestertons, says: “The London property market is currently offering great value for buyers, with mortgage rates lower than in recent years and the Base Rates expected to fall to around 3.25% this year.
“Now is an ideal time for well-priced sellers and for buyers who have delayed purchasing to re-engage with the market.”
Looking ahead, the firm does not expect prices to move beyond low single digits across London or the wider UK in 2026. However, the release of pent-up demand could lift transaction volumes early in the year and begin to apply modest upward pressure on prices, particularly if inflation continues to fall and interest rates are cut further.
RENTAL GROWTH TO STABILISE
In the rental market, London rents rose again in November, with Prime Central London rents up 4.5% year-on-year.
Chestertons says supply is tightening ahead of the Renters’ Rights Act coming into force in May 2026, although overall rental growth is expected to stabilise rather than accelerate sharply.
Adam Jennings, Head of Lettings at Chestertons, says: “More aspiring first-time buyers are taking the necessary steps towards homeownership, which is further boosted by the current choice of mortgage deals.
“This has somewhat dampened demand for rental properties in some parts of the country and could result in rent levels remaining fairly balanced in 2026.”
