London’s prime residential market – the high-end, luxury housing segment in prestigious postcodes – has evolved notably in the few months since our April update. Cautious optimism at the start of 2025 has given way to clearer signals of a market finding its footing amid persistent headwinds. Prices in Prime Central London (PCL) have softened a bit further, while Prime Outer London (POL) remains comparatively resilient. Buyer demand is still subdued but shows early signs of revival , aided by stabilising financial conditions. Meanwhile, policy changes and taxes introduced earlier in the year are still filtering through and influencing behavior on both the buy and sell side. What’s Changed Since April? Prices & Values: Prime Central London prices are down slightly more year-on-year (around -3% to -4% now, vs ~-1% in Q1), reflecting continued adjustment. In contrast, prime outer districts are flat to modestly up year-on-year (0% overall, with some areas +1–3%). PCL values now sit roughly 22% below their 2014 peak in nominal terms, marking the best value in over a decade. Sales Activity: Transaction volumes remain low – the number of prime sales in H1 2025 was about 6–7% below the same period in 2024. June in particular saw 27% fewer sales than June 2024. However, buyer activity is picking up beneath the surface: properties going “under offer” rose ~9% year-on-year in June, indicating more deals are in the pipeline for Q3. Supply & Negotiations: Supply has increased further. New prime listings in Q2 were ~ 14–19% higher annually, and total available stock is up over 13% vs last year. Many sellers have responded to slow markets by cutting asking prices – about 41% of prime properties sold in June had a prior price reduction, and the average discount to initial asking is ~8%. Serious sellers are accepting the new reality: Knight Frank reports that those who have had properties listed for 6–12 months are making double-digit price reductions to get deals done. This negotiability has put discerning buyers in a stronger position. Policy Impact: Government policy moves in early 2025 have started to bite. In April , the stamp duty surcharge on second homes and investment properties was raised from 3% to 5% , which further dampened investor demand in April/May. Meanwhile, the “non-dom” tax reforms (which limit time under the old regime and impose UK inheritance tax on worldwide assets for long-term non-domiciled residents) are contributing to an exodus of some overseas owners . Prime market analysts tie the sluggish sales in central London partly to these fiscal changes, as some international investors either pause new purchases or even sell assets in light of less favorable UK tax treatment. Financing Environment: A major shift since spring is the turn in interest rate trends. The Bank of England cut rates in May (by 0.25%, to a 4.25% base rate) and then held rates steady in June. This policy pivot, reflecting easing inflation, has begun to reduce mortgage costs for high-end buyers. Lenders have started trimming mortgage rates; indeed, by early July several major banks were offering 5-year fixed deals below 4% for low-risk, affluent borrowers. The era of relentless rate hikes has likely peaked , and banks are now “vying for business as borrowing costs drift lower”. While prime buyers often have significant cash, the improved credit conditions (and some lenders’ willingness to stretch loan-to-income ratios for top earners) are boosting confidence for those who do require financing. (For more on securing large or complex-property mortgages in 2025’s climate, see our recent guides on High-Net-Worth Mortgages and Financing Luxury Property - https://www.willowprivatefinance.co.uk/private-client-finance-in-2025-tailored-lending-for-complex-profiles.) In summary, London’s prime market finished Q2 2025 on a sluggish but stabilising note. Next, we dive deeper into the latest price trends, buyer/seller behavior, and what to expect as we head into late 2025.

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