Prime London’s housing market has begun the year on the back foot with transactions down sharply, prices still falling and supply running ahead of demand, according to new data from LonRes.
Sales volumes in January were 30.2% lower than a year earlier and 20.2% below the pre-pandemic January average of 2017–19.
While new instructions rose 2% year-on-year – and were 29.1% above the pre-pandemic average – the imbalance has left stock levels 8.3% higher than a year ago, despite easing from a peak last September.
Average achieved prices across prime London fell 5.6% annually in January, leaving values also 5.6% below pre-pandemic levels. More than half of homes sold (54.6%) had undergone at least one price reduction, and the average discount to asking price stood at 10.3% – a level not consistently seen in double digits since 2019.
INSTRUCTIONS RISE
At the top end, new instructions for homes priced above £5m rose 12.5% year-on-year and were more than double the pre-pandemic January average – the highest January figure since records began in 2000. Yet transactions in this bracket fell 7.1% annually and are down more than 30% over the past six months compared with the same period a year earlier.
In lettings, activity improved but rising supply kept rental growth in check. Lets agreed were up 3.9% year-on-year and new instructions climbed 31.5%, while available rental stock rose 44%.
Average rents dipped 0.7% annually in January, though they remain 31% above pre-pandemic levels.
The data suggest a market still adjusting after last year’s Budget-related uncertainty, with sellers competing harder on price as buyers remain cautious.
BUDGET BOUNCE
Nick Gregori (main picture, inset), Head of Research, LonRes, says: “January typically sees high levels of new instructions and 2026 was no exception, recording the highest figure for the month since 2016 across all price points and the highest ever for the £5m+ market.
“In part this includes an element of catch up, with some sellers putting their plans on hold in the latter part of 2025 due to uncertainty around the Budget but now deciding to sell.
“The number of homes available for sale decreased through the final quarter of the year – more due to withdrawals than any sustained increase in transaction volumes – but ticked up again as sales activity started the new year slowly.
“One further factor potentially complicating matters is the ongoing fallout from a significant cyber-attack at Kensington and Chelsea council in November, limiting their ability to process searches or planning applications. Both of these are likely to slow down transactions in the borough, which covers many prime London neighbourhoods.”
DEMAND REMAINS ROBUST
And he adds: “Values have been decreasing and the prospects for price growth in the short term are likely to be restricted given the volume of homes on the market and relatively limited pool of demand.
“One possible boost to prices – lower borrowing costs driven by lender competition and falling interest rates – appears to have stalled. UK swap rates, which banks use to set the prices for fixed rate products, have increased in the early part of year in response to political uncertainty at home and around the world. However, the financial markets still expect two base rate cuts this year from the Bank of England.
“January saw trends in the prime London lettings market continue from the end of last year. Annual rental growth remained in negative territory as the number of properties available to let rose again. Activity increased slightly and discount levels remain low, suggesting demand remains robust.”
