London’s housing market has been going through a sticky patch. With political uncertainty around the general election in 2024 and before the Budget in the autumn, sales rates have plummeted to record lows.
The number of home sales in 2024 dropped to 75,363 in 2024, according to new analysis from the property group JLL, the lowest for more than 20 years, and even lower than at the height of the Global Financial Crisis and property crash of 2008. The final count for 2025 is on track to be similar.
Sales rates are important for household mobility and the economy as a whole.
London transactions are at an average of 92,500 per year over the last decade, down 10 per cent on the previous 10 years (115,000 sales per year).
“The missing 221,000 sales equates to £4.4bn in lost stamp duty revenue,” says Marcus Dixon, head of residential research at JLL. Let alone the businesses that benefit from people moving house, such as removal firms, decorators and builders.
“London’s property market has become very gummed up,” says Anthony Breach, director of policy and research at the Centre for Cities.
“People are therefore managing by living with their parents for much longer, house sharing with more tenants in less space, or moving out of London.”
So, what does this mean for 2026?
London property — what will happen this year?
Wage growth has outstripped house price growth and London property is that little bit cheaper.
Prices are 5.1 per cent lower now than they were in the hot post-covid market of 2022, Land Registry data shows.
Affordability should improve across the year too as the Bank of England base rate, and therefore mortgage repayment rates, come down. After the reduction in December (from 4 per cent to 3.75 per cent) more cuts are expected to follow starting in February.
“The view is that inflation has peaked and will now slide so there is nothing to stop the Bank of England cutting rates more aggressively, especially with a risk of recession to manage.
“By next summer, I expect to see some mortgage offers in the twos,” says Mark Harris, partner at mortgage broker SPF Private Clients.
The pipeline of deals is looking more promising already, with some estate agents reporting a mini flurry of offers immediately after the Budget.
Nick Leeming, chairman of Jackson-Stops, is one of them. “This improving outlook is helping to restore confidence. The first quarter of the year is set to be busy, driven by pent up demand.
“Following almost six years of volatility, 2026 is now expected to mark a return to a more stable and recognisable housing market.”
Agents are not getting carried away, however, forecasting house price growth of 0 per cent in London (Savills) or up to three per cent (Jackson-Stops.)
Rightmove predicts a one per cent rise in asking prices in the capital. But Dixon cautions: “The number of people coming back to the market will be a trickle rather than a flood.”
Will more new homes be built next year?
While sellers are expected to launch their properties in the spring, the dearth of new homes will remain the root cause of London’s housing costs crisis in 2026, keeping affordability levels stretched and a lid on transaction rates.
“The government understands there is a problem,” says Breach.
“This way we should see more affordable homes being built along with more private homes. It is a positive step in the short-term but the government needs to make big changes to make much more land available for new homes,” he says.
Matthew Pennycook, Minister for Housing and Planning, has given a default green light to homes built around railway stations and high-rise buildings, while one medium-sized developer tells Homes & Property they have been asked by Government to outline what help is needed.
Maybe there is more help for first-time buyers on the way after all.
“Help to Buy was controversial. There was a view that it lined developer pockets,” says Dixon.
“However, in order to encourage them to build the government must put something in place to reassure them that there is a market ready to buy. We need this now.”
Where Londoners will find value for money in 2026
House price ups and downs are not necessarily the best metric by which to judge a healthy housing market, not in isolation at least.
While house price falls give first-time buyers hope they can purchase their first place (if they can amass that pesky deposit of course) it stops those existing flat owners from building equity in their property to move up the ladder.
Many of them shift around the capital (or even leave it) to find cheaper areas in which to upsize.
‘We knew we had to buy a project or move quickly’
Brockley farmers’ market
Daniel Lynch
Carrie* (34), and her partner, put their flat in north-east London up for sale last February when the interest-free period of their Help to Buy loan was up.
They wanted to buy a house in Brockley, where they have friends, and where there are houses within their budget (£700,000). But they faced stiff competition.
“We saw one 1930s house which was a bit tired but didn’t need major renovation and got 20 offers. We knew we had to buy a project or move quickly,” she says.
Not so fast: their first buyer pulled out and they are only now approaching completion with their second.
The whole process will have taken nearly a year but they have found a three-bedroom period house in Brockley.
“We won’t get excited until we have the keys,” Carrie says.
The couple love the high street in Brockley, full of independent cafes and restaurants, and surrounded by other village centres. She cites Good as Gold for the “best coffee’, the wine bar Joyce, Parlez for brunch.
“Peckham, Camberwell and Forest Hill are performing well with young professionals priced out of east London,” says Dominic Agace, boss of Winkworth.
Developments in Canary Wharf look set to drive sales in the southeast too.
JP Morgan Chase is building a £3bn mega tower, Deutsche Bank is expanding its office, while Visa is relocating its European Headquarters from Paddington to the docklands’ banking district.
“The south-east has been London’s best kept secret,” says Richard Saltmer, director at Dexters.
“Brockley, Honor Oak, Ladywell and Nunhead are emerging pockets where bar and cafe owners and restaurateurs want to open. And it is only half an hour into central London,” he adds.
Does mansion tax really matter?
“Combined with increasing energy and maintenance costs, the so-called mansion tax could push those homeowners to make the [downsizing] move they had been contemplating,” says William Marriott, partner at the law firm Charles Russell Speechlys. So, it may even increase sales volumes rather than dampen them.
It is the logistics of the five-yearly valuation system which is causing a stir.
“Council tax reform is long overdue, but far from simple. The current system is based on property bands set in 1991 using “drive-by” valuations and even then the cost to do it was around £19m. To repeat something on that scale would be hugely expensive,” says Leeming.
The probable methods would either be the “drive-by”, automated valuations, teaming up with one of the portals or using a drone.
“This happened in Greece,” says one high-end estate agent. “People were busy trying to cover their swimming pools up to keep the value down.”
Without going inside a property it is very difficult to value it. Therefore, the appeals process is likely to be very long and expensive, explains George Jackson-Stops who works for Strutt & Parker in Fulham.