The London property market has historically been attractive for many reasons, in particular for its potential for long-term growth and demand.
But while house price growth across the UK has stalled, London has probably seen the biggest decline.
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Could London’s fortunes be changing any time soon and will it continue to attract buyers and property investors?
Will London house prices rise in 2026?
The average house price in London is £542,304 – 102% higher than the UK average of £267,957.
But prices across the capital have languished in recent years. In fact in 2025, they fell by 1.8%, Land Registry data shows.
Things aren’t expected to turn positive over the near-term either, according to Savills, which expects house prices to flatline in 2026.
However, the estate agent said the market will turn positive in 2027 and continue this trend until the end of the decade. Cumulatively, it forecasts London house prices will grow by 13.6% between 2026 and 2030.
|
Kensington and Chelsea |
£1,225,499 |
|
City of Westminster |
£872,135 |
|
Camden |
£778,395 |
|
Richmond upon Thames |
£796,950 |
|
Hammersmith and Fulham |
£727,665 |
|
Wandsworth |
£678,034 |
|
Islington |
£683,506 |
|
City of London |
£697,697 |
|
Haringey |
£647,601 |
Credit: ONS, April 2026
How is the Iran conflict affecting the market?
The US-Israeli attacks on Iran on 28 February and the ongoing tensions since have thrown the UK housing market into flux.
The average two-year fixed-rate mortgage was 5.81% as of 24 April, up from 4.83% on 2 March, according to data firm Moneyfacts. However, this is a fall from a high of 5.90% on 12 April.
London has not been immune from the fallout.
The latest Royal Institution of Chartered Surveyors (RICS) report for March reveals estate agents and surveyors in London were more sceptical about house price growth in the capital compared to the February report.
Meanwhile, a number expressed concerns over future sales activity in what was an “already fragile” market prior to the tensions in the Middle East.
Tom Bill, head of UK residential research at estate agent Knight Frank, said house prices in the capital “will come under pressure” over the next few months as buyers’ budgets are squeezed by higher mortgage rates and with property prices significantly higher than the UK average.
However, he said he could “see a case” for interest rates to be cut later in the year which would see activity in the market grow. This could push property prices up.
He said: “You can see a case for rate cuts coming back onto the table for the Bank of England, but…for large parts of this year I imagine it [the BoE] will be holding steady in terms of where the bank rate is.”
Meanwhile, Lucian Cook, head of residential research at Savills, said tensions in the Middle East could “enhance the UK’s safe haven credentials – especially those of an attractively priced prime central London market”.
Though this needs to be put in the context of a higher tax burden which is “likely to temper any impact on values”, he added.
Why have London house prices stagnated since 2016?
David Fell, lead analyst at estate agents Hamptons, said London house prices started shooting up in the spring of 2009 following the 2008 financial crisis, but growth fizzled out by the mid 2010s and prices haven’t picked up since.
He said the large-scale sale of flats, which are generally cheaper than houses, have kept overall house prices suppressed since the start of 2025.
“Around 60% of sales last year in London were flats and that’s weighed down on average London prices,” Fell explained.
This trend of lukewarm growth in flat prices pushing overall property prices down has been rumbling on since 2016.
The average price of all London properties rose from £490,055 to £542,304 (10%) between February 2016 and February 2026, according to the most recent Land Registry data.
But flats and maisonettes have gone up in price by just 0.5% (£418,667 to £420,635) over the same period.
Indeed, flat and maisonette prices fell by 7% between February 2022 (£455,139) and February 2026 (£420,635).
What does it all mean for buyers and renters?
For buyers, London still remains an expensive option, particularly for first time buyers who face prices significantly higher than the UK average.
But for those drawn to the capital, now could be a good time to buy before prices start creeping up from 2027.
For renters, it’s worth noting that rental costs have surged in recent years, but growth across the UK was lowest in London in the 12 months to March 2026 (1.7%).
Renters may face higher costs after 2026 though, as more landlords sell up due to regulatory changes and tax changes such as the Renters’ Rights Act and the hike to property income tax rates in April 2027, according to Bill, from Knight Frank.
Meanwhile, Bill said the estate agent had seen an uplift in people returning from the Middle East and looking for short-term rentals, which could push up demand.
Investors from the UAE are finding London an attractive location for investing in property
(Image credit: FotoVoyager via Getty Images)
Is London property still worth investing in?
There is a mixed approach for investors. Some are selling due to costs and tax pressures, whereas others remain invested as London continues to show signs of resilience and rental demand.
According to Barratt Homes, there are 2.7 million private renters in London, providing opportunities for landlords.
London also remains the number one international city for wealthy Gulf investors, according to the latest Gulf Cooperation Council Investment Barometer from AlRayan Bank.
Its survey of 150 high net worth individuals from Saudi Arabia, Qatar and the UAE with a minimum £10 million in wealth, found 29% invested in London property in 12 months ending September 2025 ahead of New York (23%), Paris (23%), Los Angeles (22%) and Tokyo (21%).
James Mulvaney, head of digital at property finance brokers Clifton Private Finance, said despite the challenges facing landlords, there was also potential for growth for those applying the Buy, Refurbish, Refinance, Rent (BRRR) method.
In any case, despite its challenges, it looks like London will continue its resilient streak, attracting buyers, as well as investors both foreign and domestic as rental yields could deliver a return on investment, with the average rental yield in London ranging between 5% and 6%.
However, some landlords may take a more cautious approach with the changes laid out in the Renters’ Rights Act, including limiting advance rental payments to one month and giving tenants the right to request permission for a pet, which took effect from May this year.
