Prime London’s housing market ended 2025 on a mixed note with rising supply, weaker demand and falling values reflecting continued disruption following the Autumn Budget, according to analysis from LonRes.
December data shows transactions across prime London were 18.6% lower than a year earlier and 19.6% below the 2017–2019 pre-pandemic December average.
In contrast, new sales instructions rose sharply, up 32.0% year on year and 66.3% higher than the pre-pandemic benchmark.
Despite a pullback from a September peak, the volume of homes available for sale at the end of December was still 10.3% higher than a year earlier.
PRICE PRESSURES
Price pressures intensified as supply outpaced demand. Average achieved sold prices fell by 6.0% on an annual basis in December and were 4.9% below pre-pandemic levels. The average discount from initial asking price widened to 11.4%, up from 9.5% in November.
Looking beyond the month, LonRes said the Budget had distorted usual seasonal patterns, making year-on-year December comparisons particularly volatile. Over the final quarter of 2025, transactions were 18.1% lower than a year earlier, while full-year transactions fell by 8.1%.
Under-offer numbers were more resilient, rising 3.6% over the year, although fall-throughs increased by 12.0%. New instructions finished 2025 up 12.7% year on year, alongside a 28.7% annual rise in price reductions.
The average achieved price per sq ft in prime central London was the lowest level since 2012.
Longer-term trends underline the scale of the adjustment. The average achieved price per sq ft in prime central London stood at £1,606 in 2025, the lowest level since 2012 and 12.8% below the 2015 peak.
Performance varied by area, with inner prime values down 0.6% over the period, while fringe locations edged 0.3% higher.
SUBDUED TOP END ACTIVITY
Activity was particularly subdued at the top end of the market. Transactions above £5m were 39.5% lower in December than a year earlier, although new instructions rose by 2.9%. Stock levels continued to build, with 11.4% more £5m+ homes available for sale across prime London than at the end of 2024.
LETTINGS TURNING POINT
Over the full year, £5m+ sales volumes were 15.4% lower than in 2024 but remained 16.6% above the 2017–2019 average, reflecting stronger longer-term demand.
In the lettings market, December marked a turning point. Average prime London rents fell by 0.6% year on year, the first annual decline since summer 2021. Despite this, rents remain 31.2% above their pre-pandemic average.
Lettings activity strengthened as supply increased, with lets agreed up 16.9% annually and new rental instructions surging 59.1%. The number of rental properties available at the end of December was 36.6% higher than a year earlier.
NOT A CLEAR PICTURE
Nick Gregori (main picture, inset), Head of Research at LonRes, says: “December was an odd month for the prime property market in 2025, with its usual position marking the end of the year awkwardly overlapping with the post-Budget fresh start.
“Given that the end of 2024 was also disrupted by tax speculation, the year-on-year comparisons for December alone do not necessarily give a clear picture of the market as buyers and sellers adjust to the new information on future taxes.”
FALLING VALUES
He adds: “One thing that is clear is that values are still falling, particularly in prime central London where the average sold price per sq ft is back to 2012/13 levels in some areas. It would be bold to call this the bottom of the market, but the relative value offered by PCL compared to some neighbouring and fringe areas will surely appeal to buyers with a longer-term view seeking homes to live in.
“As always, a key driver of demand is borrowing costs and there are signs that competition between lenders and expectations of base rate cuts are combining to improve the outlook here. Inflation is still a little high, which will likely preclude faster or larger cuts by the Bank of England, but mortgage rates are heading in the right direction.”
MORE HEADWINDS
And he says: “There are also some potential headwinds to a market recovery. The domestic economy continues to struggle, with growth barely above zero for the past two quarters of GDP data. Looking globally, the volatility of US foreign policy makes predicting anything rather challenging, but as yet the intervention in Venezuela and threatened one in Iran haven’t unsettled the financial markets.
“While the changes to the ‘non-dom’ regime have contributed to lower overseas demand for prime London property, its status as a safe haven in an unstable world continues.
“In the lettings market, the slowdown in rental growth finally turned into an annual fall in December, the first since summer 2021. Activity improved following an increase in supply in December. At the end of the year, stock on the market was 36.6% higher than 12 months earlier, with rises across all price points.”
