An elegant Georgian facade, a full-width balcony and an exclusive address in South Kensington just steps from the Natural History Museum and the V&A. Yet the listing price of this west London flat at Queen’s Gate Gardens has dropped by nearly £1m since last year, to £4.4m.
It is far from an isolated case. A nearby house originally listed at £20m was slashed to £14m this year, says a local estate agent. In neighbouring Notting Hill, a stucco-fronted property that came to market two years ago at £16m is now being offered for less than £14m, they said.
London’s premium property market is stuck in a rut. While borrowing costs and stretched affordability weigh on everyday buyers, the city’s richest residents are also making deep cuts to the prices of their multimillion-pound homes.
This market is a world away from the rest of the UK property market – where the average house price was just under £275,000 in September, according to Nationwide. The well-heeled neighbourhoods also present a stark contrast with much of the capital, where Londoners struggle to get on to the housing ladder, face rising rents and a lack of affordable housing, and estate agents report the market for flats is now “dead”.
But neighbourhoods such as Knightsbridge, bordering Hyde Park and home to Harrods, are also feeling the pinch, said Harry Dawes, a buying agent based in Belgravia.
“There is a flat on Pont Street, a five-minute walk from Harrods, which sold at £4.4m in 2014, then sold at £3.5m. It can now be bought at £2.5m.”
Deflating the bubble
For decades, London’s property prices raced ahead of the national average. But that gap has been slowly narrowing: while the average price of a UK home rose by about 2% in the year ended in June, prices in inner London boroughs fell by 8.3%, according to the Office for National Statistics.
That drop has been particularly pronounced in Westminster – which includes areas such as Marylebone, Belgravia and Mayfair – with prices down 25.4% year on year. In the City, prices slumped by 20.4%, and in Kensington and Chelsea, prices fell 14.7%.
Properties in the capital became overvalued in the mid-2010s after a period of rapid price growth, said Anthony Payne, the chief executive of the data analyst LonRes. London was then hit hard by Brexit, the Covid pandemic, higher property taxes and a surge in borrowing costs.
Now, owners who bought at the peak now face losses of as much as 25% if they choose to sell, according to estimates from the estate agent Savills.
“London benefited dramatically from international investment and buyers wanting property here as a store of wealth and a way of making money,” Payne said. “These are the people that inflated the market, but now more and more of them are deserting it.”
Jeremy Gee, the managing director at the super-prime estate agent Beauchamp Estates – whose portfolio includes a £42m sub-penthouse overlooking Hyde Park – said the decline had also been driven partly by the exit of super-wealthy groups from the UK, especially after the abolition of the non-dom tax regime.
“There is a section of society who have left the UK recently for lots of reasons, but mainly because of tax,” he said.
“When there are not that many buyers and lots of properties, the prices are going to be softer. Many of our sellers have decided that enough is enough – let’s just sell the property and move on.”
Tax changes have put sellers on edge, too, he added. Last year, the former chancellor Rachel Reeves announced plans for a “mansion tax” on homes worth more than £2m.
This nervousness has triggered a slowdown across the higher tiers of London’s market. Prime properties spent an average of 186 days on the market in the first half of 2026, up from 178 days in the first half of 2025, according to LonRes. Over the same period, the average discount to asking price widened from 8.3% to 10.4% – sellers have grown more likely to accept lowball offers.
Sellers, who normally own these properties for at least a decade, “don’t like it but have to accept it,” said Dawes.
“If they are older, they have to take a lifetime view on their property and accept that from a profit and loss perspective, this last trade might not look good.
“We bought three flats for a client’s kids last year – two in Chelsea and one in Notting Hill – and every seller was selling at a loss.”
A divided market
Even with multimillion pound discounts propping up on the market, Stuart Bailey, the head of super-prime London sales at the estate agent Knight Frank, said there were still buyers willing to pay above the asking price for “the very best in class” properties.
“A fabulous address, lovely views, immaculate style and newly refurbished,” he said. “It is a matter of premium or discount, retail or trade, brand new or not, and there is nowhere in between. It’s the discounted properties dragging the market down.
“Sellers are more and more realistic about moving on,” he added. “They do not see material price growth on the horizon.”
“With a Labour government the concern is always that there’s going to be some kind of wealth tax somewhere,” he said.
“But many wealthy people also just accept the cost of taxation and that London is simply an expensive city to live in.”
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Camilla Dell, a buying agent, said demand is still strong from a wide base of international buyers, including Americans, Singaporeans and Nigerians. Politics, she said, rarely comes up in conversation.
“Most people accept that the UK does not have the best political stability but they want to live here,” she said. “And actually, it helped that Andy Burnham ruled out an overhaul of property taxes in the next budget.”
Sluggish prices in London are in stark contrast with the likes of San Francisco and Lisbon (a hub for Europe’s digital nomads). Both cities have benefited from booming wealth in the tech sector, with prices rising by 4.8% and 3.3%, respectively, in the first half of this year. Tokyo has been the global standout, with prices up 7% as international buyers have swooped on a weak yen and snapped up luxury properties already in low supply.
Berlin’s prime market, which was the worst performer in Europe, has suffered under the weight of rising borrowing costs and meagre economic growth.
London’s trophy homes
While the multimillionaires’ tier of the property market is being squeezed, the billionaire “super-prime” end of the market is buzzing with activity.
This year, billionaire Reform donor Nick Candy sold his Chelsea home for more than £270m, which is believed to the UK property market’s biggest single house sale in history. Meanwhile, the Holme, the 40-bedroom mansion inside Regent’s Park, is reportedly nearing a £190m sale, less than two years after it was sold for £139m in 2024.
“There have been some very big transactions in super-prime – those are people buying long-term family homes and trophy assets,” Dawes said.
For agents, their cut on these deals – typically about 2% – can run into the millions, and business is thriving. The sale of homes priced at £10m or more climbed 50% in the three months ended in June, compared with the same quarter in 2025, according to the property developer JLL. Meanwhile, Savills found that transactions in the £15m to £20m bracket rose by almost 40%, also in the second quarter of this year compared with last.
The rise of newly minted multimillionaires from the world of tech and social media is driving new renovation trends, too – with more calls for home cinemas, steam rooms, saunas and dedicated yoga and meditation spaces, according to the interior designer Nu Projects.
Still, many of the wealthy are waiting on the sidelines. Beauchamp says that seven out of 10 of its ultra-prime clients are now choosing to rent rather than buy, because they want to save on maintenance, stamp duty, service charges and property taxes – as well as anxiety over whether the government will introduce higher taxes on property, wealth and pensions.
It is pushing prime rental stock into scarce supply. Prices in this market rose 1.6% in the year ended in June, according to Savills. Super-expensive tenancies, where tenants hand over at least £5,000 a week – were up 17% last year, according to Knight Frank.
A buyers’ market
Such intense competition for “best in class” properties mean that even in a fragile market, the most discerning buyers can still face stiff competition, advisers said.
“There’s still demand from overseas buyers who want to buy best-in-class trophy assets,” Gee says. “American and Middle Eastern buyers are underpinning that market.
“But then there is everything beneath that. Anything secondhand, needing a bit of work, where you might normally find a domestic buyer, that is where it is a bit stickier.”
The outlook for the broader prime market remains less rosy. The estate agent Strutt & Parker has downgraded its forecast for prime central London price growth to 4.4% by 2030, compared with an estimate of 9% to 12% at the start of the year.
For now, the balance of power remains with buyers in London, Payne said.
“I look at some of the stuff that’s coming on the market and you just think to yourself, ‘My God, this is such unbelievably good value’,” he added.
“Hand on my heart, I do not think we are at the bottom of the market yet.”