London’s homeowners have entered 2026 to a drip-feed of dispiriting headlines – record percentages of properties being sold at a loss, double-digit valuation declines, and experts forecasting little, if any, price appreciation for the year ahead.
And yet the reality is more complex, and suggests that many, if not everyone, among the capital’s propertied class are faring OK.
Is the price right?
A lot of properties were sold at a loss last year in London. Indeed, research from estate agency Hamptons found that 15 per cent of sellers received less than they had paid, which, given elevated levels of inflation in recent years, will have entailed some painful real-terms losses. This is nigh on triple the proportion of losses in 2015, when house prices were coming off a decade of rampant growth.
At this point, one of Monty Python’s Four Yorkshiremen might well interject: “Fifteen per cent, you were lucky.” And he would have a point. England’s northernmost regions have consistently experienced these types of losses over the past decade.
Indeed, as many as 30 per cent of sales in England’s north-east have been lossmaking in recent years, and even now, after a few years of decent price growth, the proportion is about the same as in London.
And this is hardly a market on its knees. Savills is forecasting 29 per cent price appreciation for the region through to 2030 – the joint highest in the country – and construction levels per capita are broadly in line with the national average. Perhaps Londoners shouldn’t panic just yet.
But if these unfortunately timed sales aren’t enough to perturb, then perhaps reports of rapidly falling house prices should. House prices in certain boroughs fell by as much as 15 per cent in the year to November, according to Land Registry data, with Westminster and Kensington & Chelsea leading the way.
While London house prices overall also declined over the same period, this was by an unremarkable 1 per cent. And although falling prices may have some highly leveraged homeowners looking nervously over their shoulders, but many are still sitting on sizeable gains. Despite the recent slowdown, average property prices in the capital have still risen fourfold this century, and by 16 per cent over the past decade.
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Inners vs outers
House price performance varied considerably by borough, with inner boroughs generally underperforming those on the city’s periphery. This is partly due to affordability. Properties in London’s outskirts are generally cheaper and so offer first-time buyers a more accessible toehold on the housing ladder.
This is supporting prices. Our analysis shows a correlation between a borough’s house price growth last year and its average property price: the cheaper the borough, the greater the likelihood of growth.
Buyers’ preference for houses over flats is also a factor, with the former unsurprisingly more commonplace in outer boroughs. A decade of negative publicity for flats, whether due to fire safety issues in the wake of Grenfell or rapid increases in ground rents and service charges, has dissuaded many from ownership.
So, too, have the associated costs with buying property, most notably stamp duty. Under the current regime, a homeowner who started in a £400,000 flat before upgrading to a larger £700,000 flat and then ultimately a £1,000,000 family house would incur a prohibitive £74,000 of cumulative stamp duty charges in doing so. Some are preferring to reduce their overall stamp duty bill by skipping steps and renting until they can afford that final family home.
“The whole concept of the housing ladder is broken,” says Katy Warrick, head of London residential development research at Savills, a property broker. “People don’t want to transact every two to three years.”
“This is partly why the rental market has been so strong for the past few years,” notes Oliver Knight, head of residential development research at Knight Frank, another broker. “More people are staying in the private rental sector.”
Flat prices have been stagnant for the past decade as a result, significantly underperforming houses. Indeed, the proportion of London flats selling at a loss in 2025 was six times higher than for houses, according to Hamptons (22.2 per cent versus 3.5 per cent).
On this logic, one-bed flats appear especially vulnerable to price depreciation, with fewer people looking to buy them as long-term homes.
Prime isn’t fine
The prime London market is another area to have experienced well-documented troubles in recent years. Tax changes and political instability have reduced buyer interest, not least from overseas. Prime values in central London have fallen by 20 per cent over the past decade as a result, according to Savills, while those on the outskirts of the capital have fared better, but still lost value.
This includes a 5 per cent fall in 2025, when uncertainty ahead of November’s Budget put the plans of many on hold.
But that uncertainty has lifted, after prime property owners came away with the “least bad outcome” of a council tax surcharge.
Activity has rebounded in response. Estate agency Strutt & Parker experienced a sixfold increase in new instructions from buyers with budgets above £8mn in the first two weeks of January versus the prior year, according to Claire Reynolds, head of UK residential sales.
“At the moment, London does look good value compared with some of its competitors,” acknowledges Savills’ Warrick. Yet the broker is not forecasting prime central London house price appreciation until 2028, suggesting that challenges remain.
While the prime market is a world away from what most will ever be able to afford, its trickle down effect on the rest of the market makes it worth keeping an eye on.
Tools down
It is not just the prime market that has suffered due to the retreat of overseas buyers. Such buyers historically acted as anchor investors for new developments, willing to purchase properties ‘off-plan’ years ahead of completion.
This was and remains important for making developments viable, as “a lot gets undertaken by SMEs [small and medium-size enterprises] who don’t have the balance sheet to build off”, says Knight of Knight Frank.
As it is, increased regulation and elevated financing costs are prohibiting the development that London needs. New Energy Performance Certificate (EPC) registrations suggest that there were about 33,000 new dwellings completed in the capital during 2025 – less than half of the government’s 88,000 annual target.
This situation is likely to worsen before it improves. Research company Molior is forecasting a paltry 32,000 completions during 2026 and 2027 combined, although this only covers developments of 20 units or more.
Some homeowners might feel relief that there won’t be a flood of new supply to put further downward pressure on values, but new development also has its advantages.
“London’s a bit different in that sense,” says Knight. “There is a broader benefit to the local area [from new development] in terms of amenity provision, retail provision, doctors, schools.”
The broad outlook for 2026 is gloomy, with Savills forecasting no price growth in the capital overall. But plenty of opportunities and pitfalls remain for investors. Time to start researching that three-bed semi in Bromley.
