1. London’s prime central districts remain the most price sensitive
2. Outer London districts
3. Market activity
4. Outlook

1. London’s prime central districts remain the most price sensitive

2024 will be remembered as a year of political flux, with around half the world’s population eligible to vote across 64 national elections, including 8 of the top 10 most populous nations. The UK was no exception, with an earlier than expected general election in July heralding the first Labour government in over 14 years. There was also fiscal change, with the October Budget confirming the unwinding of the ‘non-doms’ tax status, trailed by the Conservatives, alongside an increase in the higher rate of stamp duty for second homes to 5%.

These policies have affected buying power within prime markets, which has fed into a broader atmosphere of caution underpinned by political uncertainty as the new parliament beds in. This dynamic has continued to play out into the first quarter of 2025, as buyers continue to watch and wait for further developments.

As such, price growth in prime central London continued to hover at -0.7% on the quarter, similar to the marginally negative quarterly growth observed since Q2 2024. The negative trend is more marked on an annual basis with -2.6% growth across the region. Notting Hill (0.0%) and Mayfair (-0.2%) were the most resilient locations in prime central London, both experiencing falls of above -1% annually. Notting Hill in particular continues to appeal from a domestic, family buyer base.

Across prime central London, prices are down 21.2% from their peak in 2014, or -42.3% on an inflation adjusted basis. As such, whatever comes next, they already represent good value in historical context.

2. Outer London districts

A similar, but somewhat less pronounced trend, has played out across the more domestic, mortgage-reliant markets of outer prime London. Prices remained steady at 0.1% on a quarterly basis, rising by 0.7% on an annual basis. While buyers have benefitted and continue to benefit from the recent base cuts, and stable mortgage rates, some are still holding back in anticipation of the further cuts predicted for 2025.

On an annual basis, price growth for houses (1.2%) outperformed flats (0.2%) in outer prime London, indicating continued demand from needs-based families, requiring generous living space. The North and East London saw the highest annual price growth at 1.3%, with Hackney (4.9%), and Shoreditch (2.4%) continuing to outperform, as emergent prime districts. Meanwhile Islington, a more established prime location, also experienced relatively strong annual growth of 2.9%.

3. Market activity

Data from TwentyCi shows that net agreed sales in Q1 2025 fell marginally by -1.2% on an annual basis at £1 million and above across London. This compares with an increase of 0.5% for instructions over the same period and illustrates the continued suppression of supply and demand levels at this prime price point.

While demand for properties priced at £1 million and above saw an annual uptick of 4.7% in January, this eased back over the following two months. Meanwhile, supply at this level saw an increase of 8.3% in March, indicating a continuation of price sensitive market conditions.

4. Outlook

The volatility in the stock markets and uncertainty over how the US approach to trade tariffs will eventually play out, has resulted in a sense of caution across prime central London housing markets, as the ramifications for wealth creation and retention are digested. We expect this to continue to hang over the market during the remainder of the year. Activity levels are likely to be supported by some safe haven investment, though the strength of this will be dependent on the relative strength of the US dollar against sterling. 

More domestically we expect a more aggressive approach to further interest rate cuts to continue to stimulate demand from mortgaged buyers. However, relatively fragile consumer confidence is likely to act as a drag on any short term price recovery in the prime housing markets. Accordingly vendors will need to take a pragmatic approach to pricing, while remaining sensitive to the changing needs and motivations of buyers.

< View our latest Q1 2025 updates here.

For more information, please contact your nearest London office or arrange a market appraisal with one of our local experts.