Prime London house prices fell by 7% year-on-year in August as uncertainty over borrowing costs contributed to a sharp slowdown in sales activity, according to LonRes.

The property analyst said the number of transactions across prime London was 19% lower than in August 2025 and 25.6% below the 2017-2019 pre-pandemic average.

August recorded the lowest number of sales for the month since 2008, while new instructions were down 22.1% year-on-year and 17.9% below their pre-pandemic August average.

However, the number of properties going under offer was 15.3% lower than a year earlier but remained 9.4% above the 2017-2019 average. LonRes said this suggested underlying demand had not disappeared, although agreed offers were taking longer to progress to completed sales.

Average achieved prices were 7% lower than a year earlier and 6.7% below their 2017-2019 average. Properties completing during August sold at an average discount of 10.4%.

Stock levels have also started to fall. The number of homes available for sale at the end of August was 1.1% lower than a year earlier and 4.9% below the peak reached in September 2025.

Half of available properties had undergone a price reduction, despite the number of reductions made during August falling by 4.6% compared with the same month last year.

MORTGAGE RATE EXPECTATIONS

LonRes said expectations of lower mortgage rates had contributed to buyers and sellers adopting a cautious approach while waiting for market conditions to improve.

Its analysis of swap-rate data indicated that expectations had moved higher over one, two and five-year periods. The one-year measure increased from an average of 3.3% in January to 4.3% in August.

Nick Gregori, head of research at LonRes, said: “There are quiet Augusts and then there are quiet Augusts. With the market in general lacking momentum so far this year, the low level of activity this summer is no great surprise, but 2026 saw the lowest number of new instructions across prime London in an August since 2011, and the lowest level of transactions since 2008.

“Although this lack of activity extended to price reductions, which saw an annual fall for the first time this year, values remained under pressure.”

Gregori added: “In the short-term mortgage costs have risen after UK government bonds saw a sharp spike in early September, further dampening buyer demand.”

£5M-PLUS MARKET ALSO SLOWS

Activity was also weaker at the top of the market. Transactions involving homes valued at £5 million or more fell by 18.8% year-on-year in August, while new instructions were down 10.4%.

Despite the annual falls, £5 million-plus transactions remained 39.1% above their 2017-2019 August average, while new instructions were 43.3% higher.

Across July and August combined, transactions at £5 million or more were 11.8% lower than a year earlier but 0.7% above their pre-pandemic average. New instructions were down 21.3% year-on-year, although they remained 37.8% higher than the 2017-2019 average.

RENTS CONTINUE TO RISE

The slowdown in the sales market contrasted with continued rental growth. Average prime London rents increased by 3.8% year-on-year in August and stood 41.4% above their 2017-2019 average.

Rental activity nevertheless weakened, with lets agreed down 27.5% from a year earlier and new instructions falling by 3.5%. Available rental stock increased by 6.1%.

LonRes said its lettings activity figures currently exclude Prime Fringe postcodes because of a change to the way listings are collected for its rental checker service.

Gregori said: “The ‘wait-and-see’ approach that has been a feature of the prime sales market for a while has had a direct impact on the prime lettings market. For reluctant buyers, the rental market allows a chance to ‘try before you buy’.

“For those deciding whether or not to sell, the rental market offers a chance to get some income in while waiting for more favourable sales market conditions. The latter trend may be partly offsetting the lack of new lettings stock from other sources, which has been blamed on higher levels of taxation and regulation.”