LONDON PROPERTY MARKET FORECAST 2025

The London property market has always been in a league of its own, characterised by high demand and unrivalled property prices compared to the rest of the UK.

The average property price in London has grown considerably over the last ten years, with data from Land Registry showing that property in the city has increased in value by over 27.6% – from approximately £400,803 to £511,279.

But what does the London property market look like for 2025 and beyond?

Several factors such as the cost of borrowing and the impact of the Autumn Budget put pressure on property prices across London’s property market for the majority of the year. This was due to its comparatively higher average property prices, greater borrowing requirements and many homebuyers – particularly international buyers – adopting a “wait and see” approach to Labour’s Autumn Budget.

However, despite this, and remaining true to the market’s traditionally robust nature, overall London property prices grew 2% throughout 2024 with a significant increase in activity by Q3, versus the same period the previous year. Data from Savills revealed a 33% increase in annual net sales for Q3 compared to Q3 2023, including a 37% increase for homes valued between £500,000 and £1million. This was heavily backed by mortgage-dependant buyers benefitting from improved rates and increased buyer confidence within the property market.

As the dust settled from the Autumn Budget and base rates began to improve, both demand and supply in the London property market had a resurgence, and this has continued into 2025.

According to KnightFrank’s Wealth Report, demand from London’s prime property comes from a diverse range of buyers, which has contributed to sustained demand despite changes to stamp duty and non-dom taxes outlined in the Autumn Budget. In fact, recent data from Benham and Reeves derived from Land Registry data revealed an increase in foreign homebuyers from all over the world – with Hong Kong buyers increasing by 5.7%, USA buyers increasing by 5.5% and Chinese buyers increasing by 12.9% from the previous year.

By the last quarter of 2024, there was more certainty within the market and this translated into a boost in demand and sales by people wanting to complete their property purchase before stamp duty 0%-rate thresholds returned to their lower norm in April this year. According to Zoopla’s January House Price Index, this surge in homebuyer demand was heavily concentrated in London and the South East – where savings will be larger – which is expected to support near-term price inflation in these regions over the first half of the year.

Demand for apartments for sale in London remained high throughout the year, and this is a trend that has continued well into 2025.

Lower levels of homeworking and the need to return to commuter hotspots near major employment hubs helped spearhead the stronger-than-expected performance in London over the past 12 months, with a better economic environment for homebuyers predicted to increase demand throughout the coming year.

London is the UK’s most sought-after rental market, proving hugely popular amongst students, graduates and working professionals from all over the world.

Recent data from Land Registry revealed that, whilst rental prices across the UK had experienced an impressive 8.7% growth in the 12 months to January 2025, it was London’s rental market that performed with 11% growth over the same time period. This brings the average London rent to £2,227 per month compared to the England average of £1,375.

Further rental growth is likely in the next 12 months, with Savills predicting 2.5% growth for London’s market alone. Similarly, Knight Frank predict 20.5% cumulative growth in Prime Central London’s rental market up to 2029 – outperforming the UK’s 17.6% of growth.

Many industry experts are predicting an even smoother landscape for homebuyers over the next five years, with declining mortgage rates and inflation stimulating more affordability within the property market – particularly in London.

CBRE predict more stability in the UK’s economy and a return to long-term growth translating into an upward trajectory for the property market, suggesting that the average interest rates for two-year fixed loans will reach a low of 3.4% by the end of the year.

Industry experts agree that cumulative growth in London will start moderately, but is set to show its trademark resilience and outperform the rest of the UK market over the next five years. KnightFrank’s latest forecasts indicate that London’s property price growth will grow 2% over the next 12 months compared to 2.5% predicted for the UK market in general. However, by 2026, London is expected to surpass the overall UK with 3.5% growth compared to the UK’s 3.0%. Similarly,

The Bank of England’s recent decision to cut base rates from 4.75% to 4.5% in February supports a healthy start to the property market for 2025, with homebuyers expected to see more cuts over the course of the year with this reflected in mortgage rates. We anticipate that this will help sustain the high level of demand for property which has characterised the post-Budget London property market and that homebuyers will begin to see sub-4% mortgage rates come to market as wider economic factors stabilise.

CBRE also predict a downward trajectory for mortgage rates, signalling that that average interest rate on a 75% loan-to-value mortgage fixed for two years, will reach 3.4% by Q4 2025.