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RESIDENTIAL RESEARCH - YEAR END 2025
SALES MARKET
BUDGET HITS CONFIDENCE
Our markets saw the biggest annual price fall since the Global Financial Crisis in 2008 as confidence amongst buyers and sellers waned over the course of 2025.
2025 saw a high number of price reductions as the market adjusted to the threat of higher property tax rises and a greater level of supply of poorly presented rental properties being offered for sale. The result was confidence that was in short supply and prices ended the year at 8% below their 2024 levels.
The price of a one-bedroom apartment today is broadly the same as it was in 2012/13, in nominal terms. In real terms, taking inflation into account, the price is effectively 33% below its 2012 level. Put another way, if an apartment that sold for £400,000 in 2012 had tracked inflation, it would be worth around £600,000 today.
Losses from property ownership is a particular concern now because of the sheer number of homes that are worth less than they were bought for. Data from Hamptons for the whole of Prime Central London, suggested that 24% of sellers sold their home for less than they paid and for owners who bought in 2015, that rises to 59%. In the UK as a whole, the equivalent proportion is around 9% - and that is consistent whether they bought 5, 10 or 15 years ago.
Several factors contributed to deteriorating conditions this year. From mid-year onwards, there was the nagging threat of tax rises in the late November budget which dampened confidence amongst buyers and sellers. Lenders too, became more cautious and by the end of the year, we noticed a growing number of ‘down valuations’ intended to protect the lender from the threat of future price falls.
The continuing flow of investor stock put up for sale boosted supply and dented values. Ex-rental properties are very often poorly presented – especially if the tenants are still in situ during the marketing process, after all, a tenant has little incentive to show the property at its best.
Interest rates did not drop as steeply or as often as was anticipated just a year ago and the challenges of fire safety persisted. Service charges outpaced inflation and reached levels that prospective buyers are unable, or unwilling, to pay. Price reductions became more and more common, as confidence ebbed.
Despite all this, the average price of a London home is more than double the national average, meaning that higher interest rates hit borrowers particularly hard.
Of all these challenges, in our experience, it is the level of annual service charges, which were the biggest drag on demand for apartments. The unpredictable costs of repairing and maintaining a house (or flat conversion) are often preferable to a service charge liability. House repairs are not mandatory and, at least in
the short term, it is possible to postpone works (and costs) to a future date. The market for houses and larger properties has heir needs for a longer time. It is our view that we are at or close to the bottom of the market. With prices at their lowest for over a decade and rents at an historic high, the appeal of securing a foothold in one of the world’s most dynamic global cities, must surely begin to outweigh the fear of service charges for the next generation of first time buyers.
The Renters’ Rights Act will have a knock-on effect on sales. It was finally given assent in early November and will come into effect in May 2026. This will give time for landlords to prepare and will undoubtedly be a window for some investors to make the decision to sell, while no-fault evictions remain an option. For investor buyers, Stamp Duty has been a major hurdle for several years. The top rate of stamp duty for an overseas buyer is 19%. For a first time buyer spending £650,000 on a home for their own occupation, stamp duty adds £22,500 to the purchase price
It is our view that we are at or close to the bottom of the market. With prices at their lowest for over a decade and rents at an historic high, the appeal of securing a foothold in one of the world’s most dynamic global cities, must surely begin to outweigh the fear of service charges for the next generation of first time buyers.
The Renters’ Rights Act will have a knock-on effect on sales. It was finally given assent in early November and will come into effect in May 2026. This will give time for landlords to prepare and will undoubtedly be a window for some investors to make the decision to sell, while no-fault evictions remain an option.
For investor buyers, Stamp Duty has been a major hurdle for several years. The top rate of stamp duty for an overseas buyer is 19%. For a first time buyer spending £650,000 on a home for their own occupation, stamp duty adds £22,500 to the purchase price at a time that they are already incurring significant incidental costs to move. An investor buyer competing for the same property would be liable for £55,000 in stamp duty. By design that gives the first time buyer an inherent advantage.
Prices for all types of homes have lost between 7% and 10% in our markets over the past year with 3 bed apartments at the upper end of that range. East London prices were proving more resilient than City or Midtown in 2022/23 – a trend which we attributed to affordability – but even here, prices slipped by 7% and 8% in 2025. Today, the budget required for a one bed apartment in City or Midtown would still be enough to secure a two-bed in East London.
Many investors bought into our markets in the 1990s when ‘Buy to Let’ was encouraged as a form of pension saving and mortgage repayments could be offset against tax on rental income. An investor who bought a one bed apartment in 1994 could sell today for around four times the purchase price, having earned 30 years or more of reliable rental income. Many of these investors have reached a natural decision point as they approach or are in retirement and choose to release their capital. The added complexity of complying with the Renters Rights Act and now the additional 2% tax levy, will often be the final nudge they needed.
2025 was a difficult year in the housing market and transaction volumes were low. Sadly, lower volumes did not translate into faster conveyancing. The typical time between exchange and completion is now between 5 and 7 months – almost twice as long as would have been the norm a decade ago. The process has become riddled with hurdles especially for leasehold apartments where managing agents are required to provide a ‘management pack’. The Conveyancing Task Force has highlighted than anti[1]money laundering regulations and building safety legislation create unavoidable friction and additional costs. One third of transactions collapse after an offer has been accepted as the parties struggle to maintain their enthusiasm.
The government has proposed major changes to the way residential property is bought and sold in England and Wales, aiming to cut costs, speed up transactions and reduce the number of sales that fall through.
The Land Registry has publicly stated that it will make its services and information “as easy as possible to access, understand and use,” by 2030, while by 2035 people will be able to make simple changes to their property ownership details themselves.
There are also several industry initiatives designed to address the issue and steps that we recommend to both buyers and sellers to help accelerate the process.
For Sellers
• Instruct a solicitor early before the property comes to market.
• Prepare a full contract pack including planning history, consents for alterations and title documents.
• For leasehold properties, prepare the management pack as early as possible.
For Buyers
• Arrange financing early, especially international funds.
• Order the survey promptly from an experienced, recommended surveyor.
• Instruct a reliable solicitor who can be responsive, proactive, and contactable.
For Both
• Push for fast local authority searches. Some councils take weeks, others take months.
NEW HOMES
The government set a target for London to deliver 88,000 new homes per annum to meet the needs of its projected population - but delivery has virtually ground to a halt in the past year, with just over 3,000 new starts in the first nine months of the year.
The challenges for developers are many and in most cases, it is simply not financially viable to build new homes in the current economic and regulatory environment. Construction costs have risen sharply for materials and labour, the planning process is long and complex, interest rates remain relatively high and the regulation around fire safety standards and affordable home requirements are onerous. Add to that the fact that prices are not rising and all of this means that developers are not starting on site. The upshot is that neither ‘market value’, nor ‘affordable’ homes are being added.
On 23 October 2025, the Mayor of London and the Government announced Homes for London, a welcome package of emergency, radical measures to bolster viability and unblock stalled schemes in the capital. The headline measures include a 50% relief from CIL and a reduction in affordable housing requirements from 35% to 20%. While this is welcome it is not expected to be enough to resolve the impasse, especially as sales demand has also been low this year.
Without pre-sales the banks are not supportive and the traditional development model does not work. The reality is that as incentives for buy to let buyers have been withdrawn, fewer new homes have been built. Institutional investors have been the only significant buyers of new build off-plan, as they seize the opportunity to assemble portfolios of ‘Build to Rent’ properties – but even they are highly cautious in the current market.
So, when Steve Reed the new Secretary of State for Housing, Communities and Local Government repeated the government’s pledge to ‘build baby build’ on his appointment in September, and announced that Councils may not refuse planning consent for projects of over 150 homes (instead referring the application to the government), no one seriously expected the government to get anywhere near its target of building 1.5m new homes across the UK by 2029.
The Planning and Infrastructure Bill is a piece of UK government legislation aimed at speeding up and streamlining the delivery of new homes and critical national infrastructure.
It was disappointing that the Budget did not bring any hoped-for support for First Time Buyers, either in the form of a ‘Help to Buy’ or stamp duty relief.
The government’s new Building Safety Regulator is an additional source of delay in the delivery of new homes on high rise blocks. There is a new requirement to have the BSR approval rather than sign off from external consultants preventing some new blocks from being occupied. As at the 1st August there were 156 applications awaiting a decision from the BSR for sites yet to be built covering 34,965 new apartments. Only 32% of buildings received approval within the 12 week target.
To find out more about the sales market in your area or an up-to-date valuation on your property, contact [email protected]
