The next two months in the prime central London (PCL) property market are unlikely to be the most active on record.
Compared to this time last year, rates of stamp duty are higher, the landscape for wealthy foreign investors is more hostile and speculation around property taxes in the Budget is more intense than in 2024.
No wonder buyers have become more cautious, as we explore on recent podcasts here and here.
However, the flipside is that prices in PCL are starting to look like relatively good value, drawing demand back towards the centre.
RISING TRANSACTION COSTS
Average prices in PCL have fallen by 20% over the last decade, largely thanks to rising transaction costs. Meanwhile, prices in prime outer London (POL) are down by 6% in a market where demand is more needs-driven.
Underlining how buyer interest is being piqued, the number of offers made in PCL in the three months to August was 9% higher than the five-year average. In prime outer London, there was a fall of 6%.
“Perhaps counterintuitively, and despite mortgage rates being higher than 10 years ago, there is now affordability in the market,” said Stuart Bailey, head of prime central London sales at Knight Frank.”
“While we may not see the same level of growth as during the last cycle in PCL, many homes are now within reach.
“If a buyer is looking to enjoy the lifestyle attractions of being more centrally located, the value in the current market can provide that opportunity.”
The number of exchanges in PCL in the six months to August was 9% down on the five-year average, which compared to a fall of 14% in POL.
SHRINKING PREMIUMS
An analysis of achieved prices paints a similar picture.
The median sold price in Fulham was £976 per square foot in Q2 2025, which compares to £925 in Q1 2015, Knight Frank and LonRes data shows. The price is based on the individual mix of stock sold in a three-month period, so is not necessarily an accurate reflection of how underlying values have changed.
However, it’s revealing to see how the premium paid for more central locations has narrowed over the last decade. In Chelsea, for example, the equivalent number fell to £1,182 from £1,359. That means buyers paid a 21% premium to live in Chelsea over Fulham this year, compared to 47% ten years ago.
Similarly, a premium of 22% was paid to live in Bayswater compared to Islington versus 34% a decade ago. Meanwhile, a 75% gap between Belgravia and Richmond has narrowed to 29% over the last decade.
We recently revised down our forecasts to a greater extent in PCL than POL due to the current uncertainty around tax and the treatment of wealthy overseas investors.
That said, a lot hinges on November’s Budget and the punitive impact of any new taxes.
Either way, we expect the price gap between PCL and POL to narrow further in the short-term, which means more buyers will inevitably look more closely at the perks of living centrally.
