UK & Prime London Property Market – End of Year Review and Outlook

Reflecting on 2025 and looking ahead to a more balanced 2026

As 2025 draws to a close, the UK property market is entering a noticeably different phase from the volatility that defined the immediate post-pandemic years. Across both Prime London sales and the wider rental sector, the past year has been one of adjustment, realism and gradual rebalancing rather than growth at any cost. While challenges remain, December’s data suggests that the market is ending the year in a more stable position, with clearer policy direction, improving supply conditions and a healthier foundation for the year ahead.

Much of 2025 was characterised by hesitation. In Prime London, buyers and sellers spent much of the year navigating uncertainty around taxation and future policy. The Autumn Budget brought confirmation of increased tax burdens on higher-value homes, including a new annual tax on properties above £2 million. While these measures were not welcomed, the avoidance of more severe proposals has allowed the market to end the year with clarity. Importantly, some of the price adjustment seen in recent months appears to reflect expectations being priced in earlier in the year. As the year closes, confidence remains cautious but increasingly grounded.

Prime London values softened through the second half of the year, with average achieved prices ending November 4.0% lower than a year earlier and 4.2% below pre-pandemic levels. Asking price discounts widened modestly, reinforcing the importance of realism in achieving sales. Yet despite this repricing, transactional activity has proven resilient. Sales volumes in November were higher than a year earlier, suggesting that well-priced, high-quality stock continues to attract committed buyers. The market may be quieter than historic norms, but it is functioning.

One of the defining features of the latter part of 2025 has been a sharp pullback in new sales instructions. Many potential sellers chose to step back, either waiting for post-Budget clarity or delaying decisions until the new year. Withdrawals increased markedly as a result, and although stock levels remain elevated compared with last year, availability has started to ease from its mid-year peak. This shift hints at a gradual rebalancing as the market moves into 2026.

At the top end of the market, the adjustment has been most pronounced. The £5m+ segment entered the year with historically high levels of available stock, and while new listings slowed significantly in the second half, supply remains elevated. Transaction volumes improved towards year-end, but pricing discipline remains essential. The super-prime market is closing the year in a more measured position, with buyers active but highly selective.

The rental market has also undergone a meaningful shift in 2025. After several years of intense pressure, tenant demand eased as the year progressed, driven by a sharp fall in net migration and improved mortgage affordability for first-time buyers. By December, demand was at its lowest level for this time of year in six years. While this represents a clear cooling, it also marks a return to more sustainable conditions.

Rental supply continued to recover through 2025, with availability up year-on-year across much of the country. Outside London, supply growth has been particularly notable, supported by stronger first-time buyer activity and properties re-entering the rental market after failing to sell. London remains more constrained, reflecting ongoing landlord exits driven by high costs and compressed yields. Even so, tenants are finishing the year with more choice than they have had in some time, shifting the focus back to pricing accuracy, presentation and service.

Rent growth slowed steadily through 2025, ending the year at 2.2% nationally and just 0.7% across Prime London. While markedly lower than recent years, rents remain significantly above pre-pandemic levels. Crucially, rental growth is now running below earnings growth, helping to repair affordability and support longer, more stable tenancies. For landlords, this points to a market that favours consistency and quality over rapid escalation.

As the market looks ahead, the outlook for 2026 is one of cautious optimism. Sales activity is expected to remain steady rather than buoyant, underpinned by clearer tax policy and a more realistic pricing environment. In the rental sector, supply remains structurally constrained in the long term, but near-term conditions point to steady growth of around 2.5%, rather than sharp increases. Longer tenancies, reduced volatility and improved affordability are likely to define the year ahead.

For landlords and investors, 2026 increasingly appears to be a year where professional management, strategic pricing and long-term thinking will matter more than timing the market. At Leo Newman, our focus remains on guiding clients through this next phase, ensuring assets are positioned correctly, risks are managed, and opportunities are maximised as the market continues to normalise