The prime London housing market closed 2025 with rising supply, weaker demand and falling values, as the impact of the autumn Budget continued to disrupt buyer and seller behaviour.

Analysis by independent property analysts LonRes shows that December activity across prime London was mixed, with transactions falling sharply despite a surge in new instructions. Over the course of the year, supply rose while demand softened, putting further pressure on prices.

There were 18.6% fewer transactions in December than a year earlier and 19.6% fewer than the 2017 – 2019 pre-pandemic December average.

By contrast, new sales instructions were 32.0% higher year on year and 66.3% above pre-pandemic norms, marking the busiest December for new listings since 2013, excluding the pandemic-affected 2020.

The stock of available homes for sale at the end of December was 10.3% higher than a year earlier, although this represented a pull-back from a peak reached in September. Average achieved sold prices fell by 6.0% on an annual basis and were 4.9% below pre-pandemic levels.

VALUES UNDER PRESSURE AFTER BUDGET DISRUPTION

LonRes said the usual seasonal patterns were distorted by the Budget at the end of November, which unsettled both buyers and sellers. While December often brings a rush to complete before Christmas alongside fewer new listings, the latest data showed the opposite effect.

Looking beyond the monthly volatility, transactions were 18.1% lower in the final quarter of 2025 compared with a year earlier and fell by 8.1% across the year as a whole. Under-offer numbers were more resilient, rising by 3.6% annually, although this was partly offset by a 12.0% increase in fall-throughs.

On the supply side, new instructions finished 2025 12.7% higher than 2024, while price reductions rose by 28.7% over the year. Withdrawals also increased significantly, highlighting growing caution among sellers.

Against this backdrop, the average discount from initial asking price widened to 11.4% in December, up from 9.5% the previous month. Average achieved values per square foot across prime central London fell to £1,606 in 2025, the lowest level since 2012 and 12.8% below the 2015 peak.

SUPER-PRIME SALES LAG RISING SUPPLY

The imbalance between supply and demand was particularly evident at the top end of the market. Transactions above £5 million were 39.5% lower in December than a year earlier, while new instructions rose by 2.9% over the same period.

For 2025 as a whole, £5 million-plus sales volumes were 15.4% lower than in 2024, although still 16.6% higher than the 2017 – 2019 average. New instructions in this segment ended the year 7.8% higher year on year, with price reductions more than double their pre-pandemic average. As a result, the number of £5 million-plus homes available for sale across prime London rose by 11.4% over the year.

FIRST ANNUAL FALL IN PRIME RENTS SINCE 2021

The lettings market also showed signs of adjustment. While activity strengthened in December, with agreed lets up 16.9% year on year and new instructions rising by 59.1%, average rental values fell by 0.6% on an annual basis.

This marked the first annual fall in prime London rents since summer 2021. Despite the dip, rents remain 31.2% above their 2017 – 2019 average. Supply continued to rebuild, with 36.6% more rental properties on the market at the end of December than a year earlier.

Prime central London underperformed other sub-markets over the year, with rental growth lagging inner prime and fringe areas, although LonRes noted that relative value may attract longer-term occupiers.

Nick Gregori, head of research at LonRes, said: “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.

“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.

“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, with stock on the market 36.6% higher than 12 months earlier.”