By Siham Ben Amor, MD of WER Investments Ltd.
Hook: Are central London prices climbing or heading over the edge? Over the past 12–18 months, central London’s property market has painted a complex picture. While national house prices in the UK rose by 3.9% by May 2025, Central London notably diverged showing a 1.4% decline between April and May, and only 2.2% annual growth in May, with average values around £566,000 (GOV.UK, Zoopla.co.uk). For anyone considering Central London property investment, the current market raises important questions: is this a boom, a bubble about to burst, or a new kind of balance?
📊 Recent Trends: Data from the past 18 months Nationally, house prices rose approximately 3.5–3.9% year-on-year in early 2025, with average UK prices rising to ~£269,000 (Office for National Statistics).
In contrast, London declined 1.4% month-on-month in May and saw annual appreciation of just 2.2%, with average prices at £566,000 (GOV.UK, Plumplot).
In Prime Central London real estate, especially ultra-prime neighbourhoods like Kensington & Chelsea, prices have tumbled 15% year-on-year, hitting the lowest levels since 2013; central London remains 21% below the 2014 peak (Financial Times).
Transaction volumes are down: Rightmove reports inner-London sales are falling and price drops of 2.1% month-on-month in July (Reuters).
Meanwhile, U.S. buyers are swelling demand, accounting for 25% of prime purchases in 2024, especially in Chelsea and Notting Hill (WSJ).
✅ The Upside: Why central London may be in balance, not freefall Discounted prime pricing: Savills and others cite a rebound in interest from U.S. and Middle Eastern buyers drawn by a pound that leaves London prime homes ~18% below 2015 levels (Moneyweek). This suggests new London property investment opportunities are emerging for overseas investors seeking discounted entry.
Falling interest rates ahead: Most forecasts predict cuts to around 3.75% by end-2025, which may support mortgage affordability and renewed demand (Reuters).
Policy tailwinds: Mortgage affordability rules recently relaxed have increased borrowing capacity up to 20% for some buyers, helping to stave off further price decline (The Guardian).
Upside potential in amenity-rich projects: Developers in areas such as Belgravia and Battersea now offer luxury branded residences with wellness services and concierge perks, a strong pull for wealthy buyers (The Times).
⚠️ The Risks: Is there still a bubble or deeper correction? Tax & policy shocks: The abolition of non-dom tax status, higher stamp duty, VAT on private school fees, and rising service charges have collectively eroded prime property attraction (Financial Times).
Oversupply in super-prime segment: Listings for homes over £5 million have swelled by ~68% in three years, intensifying pricing pressure and pushing seller discounts from ~5.4% to ~8.1% (Financial Times).
Weak rental yields: Rental yields in Mayfair hover around 2.9%, making buy-to-let economics tight, especially when weighing heavy taxes and maintenance costs (Financial Times).
Affordability crisis: Middle-class buyers in London continue to struggle, pushing some back into renting, which fuels rental demand but suppresses sales volumes (The Times).
🧭 Balanced Insight: For investors and homeowners
- Long-term investor: Entry at attractive discounts, eventual rebound likely. Risks from oversupply, tax reforms, and weak rental yields.
- Homeowner: Benefit from improved affordability and diverse amenities. Uncertain short-term value growth.
- First-time buyer: Borrowing power up, lower entry price band in outer zones. Stamp duty still high, lending criteria may tighten.
For strategic buyers, Prime Central London real estate at today’s values represents both risk and reward. Those who approach Central London property investment with a long-term outlook may benefit from discounted entry and eventual price appreciation, provided they account for tax implications, location-specific dynamics, and realistic rental yield projections.
🔚 Final thoughts booming, bubbling or balanced? While central London is not booming, and risks persist, especially in the ultra-prime market, it doesn’t quite resemble a bursting bubble either. Instead, 2025 seems to be shaping up as a year of tentative balance: discounted prices attracting strategic buyers, while caution and policy headwinds keep growth measured.
For those seeking London property investment opportunities, this moment may offer a rare chance to enter the market at historically adjusted prices, though success will depend on careful strategy and a clear-eyed view of both risks and rewards.
So what do you think are we witnessing a temporary recalibration or a structural shift in Central London property values? Share your thoughts below.
