London property market stalls as Budget tax fears freeze sales; buyers hunt for bargains in a crowded market

London's housing market has stalled as buyers and sellers pause while awaiting the autumn Budget and any government changes to property taxation. Official data show annual price growth in the capital at 0.7%, the weakest among English regions, with prices in many neighborhoods sliding and sellers slashing asking prices to attract buyers. The mood in the market is cautious, with longer selling times and a sense that momentum could stay subdued until policymakers clarify the tax landscape.

The gloom has intensified amid chatter that Chancellor Rachel Reeves could overhaul property taxation, potentially scrapping stamp duty in favor of an annual levy on homes worth more than £500,000. If enacted, the plan would tax properties at a rate set by the government based on the value when purchased, a move that could chill demand for pricey homes. In practical terms, higher-end transactions would face larger ongoing costs, influencing buyer decisions in a market already hit by higher mortgage rates and affordability pressures. For example, stamp duty on a property selling for £1.5 million would be 12% under current rules, with even higher charges on second homes, deterring some buyers and encouraging others to wait for clarity.

In the near term, price pressure is evident in standout examples: a one-bedroom Notting Hill flat on Ladbroke Grove that was listed in April 2025 at £875,000 and saw the price cut to £450,000 by July, a dramatic drop underscoring how far values can retreat when buyers pause. The transfer window in London has become a waiting game, as buyers assess whether a Budget-driven tax shift will take effect before they commit. Polly Ogden Duffy, managing director of John D. Wood, says buyers are “just waiting it out until the Budget,” noting a flood of properties on the market and extensive devaluations over the past eight weeks. She adds that the market above £1.5 million has been particularly affected, with observers pointing to the heavy stamp duty bill that accompanies high-end purchases as a deterrent in a climate of tax speculation. The stamp duty on premium properties, and the possibility that reliefs could be altered or removed, is prompting a broader re-evaluation of pricing and timing among sellers and buyers alike.

ENTRENCHED PROBLEMS

Even before the Budget rumors, the London market faced structural headwinds. The abolition of the non-domiciled regime has prompted many wealthy residents to relocate to more tax-friendly jurisdictions such as Dubai, shrinking the pool of international buyers and weighing on demand. Polly Ogden Duffy observes that the market has been saturated with listings and that the time between offer and completion has extended to levels rarely seen in her 22-year career. Richard Donnell, executive director at Zoopla, notes that London prices have underperformed the rest of the UK for nearly a decade, with affordability constraints intensified by higher mortgage rates since 2022 and limited activity from international buyers.

HEFTY PRICE DROPS

Prices in prime central London have borne the brunt of the slowdown. Savills reports that prices in prime central London are 22% lower than their 2014 peak, with the average price for a flat this year so far at about £1.89 million, down from £2.14 million a year earlier. LonRes data show 324 days on market as the median, the longest on record, along with weak turnover: among 102 properties priced between £3 million and £8 million, 55 have been reduced in price, and only eight are under offer, all below asking. Camilla Dell of Black Brick Property Solutions says there is unprecedented supply in areas such as Mayfair, Belgravia, Kensington and Chelsea, Knightsbridge, which she says will likely push prices lower. Charles Curran of Maskells adds that “the usual buyers are simply not coming—or are leaving,” with inheritance tax changes cited as a tipping point. In south-west London, Greenwich has seen whether a property will sell at a deeper discount; one four-bedroom townhouse dropped from £1.4 million to £900,000, a 35% reduction, highlighting the market’s vulnerability to aggressive price cuts and longer sale horizons. Peter, a retired financier seeking to sell in south-west London, notes that a lack of offers has forced him to reconsider his price strategy, while others who can afford to wait for a more favorable climate are choosing to sit on assets rather than reduce asks.

Image: London properties

CHAIN-FREE BENEFITS

Domestic cash buyers are increasingly influential in the current climate. Scott Joseph of Anderson Rose says only two of 15 sales this year involved overseas buyers, with one being a Connaught Village property that had previously been placed with a Dubai-based seller seeking a quick exit. The same agent describes a market where local buyers—often upsizers—are opportunistically grabbing deals when prices appear fair, even if overall liquidity remains constrained. A typical example cited involves a sale in which the seller moved to a cash-intensive approach to close a deal in a timely fashion, reflecting a broader trend toward chain-free transactions in a market where buyers seek certainty.

A BUYER’S MARKET

Not all areas have collapsed. Some neighborhoods are displaying relative resilience or even modest gains as buyers prioritize value and timing. The hottest postcodes according to PropCast are SE2 (Abbey Wood/Thamesmead), E18 (Woodford), E10 (Leyton), SE9 (Eltham) and E17 (Walthamstow), where about 57% to 60% of homes for sale are under offer. In contrast, the coldest pockets—EC2 (City, Hackney, Shoreditch), W1 (Mayfair/Marylebone), WC2 (West End), W2 (Paddington/Bayswater), and SW10 (Chelsea)—have only 8% to 13% of homes under offer. Donnell notes that London prices have underperformed for years, which complicates the outlook for sellers and underscores the unevenness of the market, with some mid-range suburbs performing better than luxury pockets.

Savills points to leafy, family-oriented suburbs as outperformers: Putney, Wimbledon and Brook Green have delivered modest price increases over the year, illustrating how buyers are targeting areas with perceived stability and schools, while the strongest activity in Earlsfield produced a bidding surge for a £1 million four-bedroom home, ultimately selling just over £1.1 million after a flurry of viewings and offers. The decision by some sellers to test the market—driven by advice from agents—has yielded mixed results, with others reporting that price reductions are essential to triggering interest as buyers weigh the Budget risks.

Across London, the pattern is clear: in a market where supply remains ample in some areas and constrained in others, pricing discipline and timing are the differentiators. Renters face their own pressures, with average London rents rising to about £2,712 per month, according to Rightmove’s Rental Trends Tracker, a separate dynamic that affects investor appetite and household budgets alike. For homeowners seeking relief, the tension between tax policy, mortgage costs and price expectations will continue to shape decision-making over the coming months as markets watch for government signals on the Budget and tax regime.

In sum, London’s property market has shifted from a period of exuberance to one of caution, with buyers and sellers recalibrating in response to policy uncertainty and shifting affordability. While some districts show pockets of demand, dealers warn that the market could remain suspended until clarity arrives on the Budget and any reform of stamp duty or capital gains relief. The path to revival will likely depend on government signaling and mortgage-rate stabilization, alongside a willingness among sellers to adjust expectations to reflect the new tax environment.