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January 22.2026
3 Minutes Read

Prime Property Prices Drop: Are We Making a Smart Investment?

Hands holding house model, discussing finances suggesting prime property prices drop.

Is the Prime Property Market at a Critical Crossroads?

The prime property market in central London is experiencing a noteworthy decline in prices, raising questions about its future trajectory. According to figures from LonRes, average property values saw a significant dip of 6.0% year-on-year in December 2025, marking a continued trend of decreasing prices that became evident since the disruptiveness of the past few years. Interestingly, current prices are nearly 4.9% lower than those observed during the pre-pandemic years of 2017-2019.

What the Current Data Reveals About the London Market

One of the striking elements in the latest report is the decrease in transactions, with December seeing an 18.6% fall compared to the previous year and nearly 19.6% fewer sales than the pre-pandemic average. However, despite this slowdown in sales, new property listings increased, suggesting a potential recovery phase in terms of inventory. Specifically, new sales instructions for the month were documented to be 32.0% higher than they were a year ago and 66.3% above the pre-pandemic December averages.

The Implications of the Luxury Market's Performance

In the high-end sector, properties priced above £5 million have experienced an even sharper decline, with a staggering 39.5% drop in sales transactions compared to the same month last year. The inventory of these luxury homes also expanded, with an 11.4% increase in listings occurring over the past year. This environment poses challenges for both buyers and sellers, and calls into question whether the luxury segment is reaching its nadir or whether turbulence remains ahead.

Factors Driving Market Trends and Buyer Behavior

According to Nick Gregori of LonRes, the current landscape reflects a complex interplay of economic factors. While prices are declining, potential buyers may be swayed by the relative value that prime central London offers versus neighboring areas. Lower mortgage rates and a competitive lending environment could rejuvenate interest among long-term investors. Critically, issues like high inflation and sluggish domestic growth—barely above zero in the past two quarters—linger as restrictive factors that may weigh heavily on a swift recovery.

Global Influences and the Future Outlook

The broader economic climate is equally important to consider, with factors such as U.S. foreign policy and changes in global political stability impacting investment decisions in London's property market. Gregori emphasizes that while recent alterations to the 'non-dom' tax regime may have reduced international demand, prime London property still retains its appeal as a secure investment amid global uncertainty.

What Lies Ahead for Investors and Homebuyers

It may seem premature to declare that the prime property market has hit rock bottom. For homebuyers and investors, the evolving landscape presents both risks and opportunities. Understanding the interplay of interest rates, economic performance, and geopolitical shifts will be essential in making informed decisions. For those looking to invest, now could represent a compelling entry point if they are prepared for volatility in the near future.

Making Sense of the Prime Property Market

The current situation in London illustrates the intricate balance between supply and demand, economic stability, and buyer sentiment. As we proceed into 2026, followers of the real estate market must remain vigilant and informed about the ongoing developments and how they may reshape investment strategies across the board.

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