Once a symbol of stability and a safe haven for real estate investment, London has now become one of the least favourable places in the UK to sell property. According to The Telegraph, citing research by TwentyCi, eight out of the ten most difficult locations for property sales are in the capital.
Several factors are at play — from global economic shifts to a reassessment of the city’s role in the lives of the middle class. The main drivers: rising interest rates, weakening demand, and declining appeal of the metropolis as a place of permanent residence.
From Rapid Growth to Market Stagnation
Between 1995 and 2015, house prices in London surged nearly sixfold — from £79,000 to £480,000, according to Land Registry data. It was a period of unprecedented growth. But the momentum has faded. Property portal Zoopla reports that over the past decade, the average London flat price has remained largely flat and, when adjusted for inflation, has actually fallen by about 25%. In the premium segment — properties priced around £1 million and above — real terms losses have been even steeper, reaching up to 42% from the mid-2010s peak.
Property Becoming a Burden
The London market increasingly resembles a waiting game. Buyers are hesitant, put off by high mortgage rates and economic uncertainty. Many are choosing to sit on the sidelines, waiting for interest rates to drop. Sellers, on the other hand, are being forced to lower their expectations — discounts of 3–5% off the asking price have become standard.
The rental market offers little solace to landlords. Yields in London often don’t exceed 4%, while in northern cities they can reach 6%. This disparity has led to a wave of small-scale landlords exiting the market as they try to offload unprofitable assets.
Tax Reforms and Investor Exodus
Tighter tax regulations have dealt another blow to the capital’s property market. Increases to capital gains tax and changes for non-resident landlords have made London less attractive for wealthy international investors. The once-consistent stream of foreign capital that supported demand is now weakening.
A Glimmer of Hope?
Despite the challenging conditions, analysts remain cautiously optimistic. They suggest the current downturn may offer opportunities for long-term investors. London remains a global city with advanced infrastructure, and demand for quality housing could rebound once the economic situation stabilises and mortgage conditions improve.
London vs the Rest of the UK: Where Is the Market More Active?
While London stagnates, other regions in the UK are experiencing far more dynamic growth. Cities like Manchester, Liverpool, Birmingham, and Sheffield — with their growing economies and more accessible housing markets — stand out. In these areas, rental yields consistently hover around 5–6%, and property prices have risen by 10–20% over the past five years, depending on the location.
Their success stems from the rise of remote work, internal migration to more affordable areas, infrastructure improvements, and investment in transport. While London loses some of its allure as the capital of office-based work, northern and central cities are thriving due to a better balance between living costs and quality of life.
What Should Investors Do? Financial Strategies for Uncertain Times
In a sluggish market with weak demand, the traditional “buy and hold” strategy is increasingly ineffective. Property owners in London are turning to new tactics:
- Selling at a Discount: A quick exit from the market and reinvestment in more profitable assets (in other regions or in commercial property).
- Mortgage Refinancing: For those who bought before 2021, falling interest rates may improve rental profitability.
- Switching Rental Models: Moving from long-term lets to short-term rentals (e.g., via Airbnb) can boost income, especially in central districts.
- Repurposing Assets: More investors are converting properties into coworking spaces, coliving units, or even boutique hotels.
The key principle is flexibility. Those who adapt quickly are better positioned to maintain profitability, even in a shrinking market.
Changing Buyer Preferences
The pandemic and economic uncertainty have reshaped the buyer profile. Whereas central locations and proximity to offices once dominated priorities, new trends are emerging:
- Suburban and countryside homes — more affordable, spacious, and peaceful.
- Properties with home offices or zoning options — essential for remote work.
- Energy-efficient homes — with rising energy costs, features like insulation and solar panels are in high demand.
- Good air quality and transport access — now more important than a prestigious postcode.
As a result, the city is losing some of its “anchor” advantages, fundamentally shifting demand patterns.
Forecasts: What to Expect in 2025-2026?
Most analysts agree that 2025 will be a transitional year. Expectations include:
- Gradual reduction in interest rates, especially in the second half of 2025, which could revive the mortgage market.
- Price stabilisation — further declines are likely to be modest or come to a halt.
- Renewed interest from international investors, particularly if tax incentives are introduced or the pound weakens.
- Continued growth in demand for quality, eco-conscious housing, as ESG criteria gain importance.
Optimists believe the market may be nearing its bottom, meaning that those who enter now could be well-positioned to benefit from the next upward cycle.