London’s prime property market showed muted activity in May 2025, according to recent LonRes data, reflecting a cautious landscape for both sales and lettings. Rental growth in prime London moderated to an annual rate of 3.3%, down from 5.0% in April and continuing a trend of low single-digit increases observed over the past 18 months. While there was a slight uptick in new lettings instructions—the strongest monthly performance of the year—agreed lets fell sharply by 21.7% compared with May 2024, signalling subdued demand. The average time to let properties was 67 days, marginally slower than the previous year but faster than the pre-pandemic average. Notably, properties priced below £2,000 per week let more quickly, illustrating ongoing strong demand at more affordable price points in the prime sector.

Despite rents sitting 32.9% above their 2017-2019 pre-pandemic averages, the lettings market remains constrained by a significant decline in available stock. The supply of rental properties is 4.6% lower than a year ago and has dropped by a stark 62.4% compared to five years prior, underscoring a structural tightness in options for prospective tenants. Nick Gregori, LonRes’s head of research, highlighted that while annual rental growth slowed slightly, the data pointed towards a more balanced market at higher price brackets, even as supply shortages continue to support demand for more reasonably priced homes.

The prime London sales market experienced a notably difficult May, with transactions falling 35.8% year-on-year and 33.5% below the May average from 2017 to 2019. Properties going under offer dropped by 22.3%, suggesting subdued buyer interest in the forthcoming months. New instructions also fell by 3.2% annually, though they remained 6.2% higher than pre-pandemic averages. Stock levels, however, have risen significantly; there are now 11.7% more properties available than a year ago and 48.2% more than in May 2020, a period heavily influenced by lockdown restrictions. Sellers appear increasingly willing to reduce prices to attract buyers, with price reductions rising by 20.1% compared to last year. The recent end of the stamp duty holiday on 31 March appears to continue influencing market dynamics, prompting cautious buyer behaviour amid elevated stock levels.

These subdued figures come in contrast to earlier parts of 2025, when the market showed more buoyancy. For example, the first quarter saw a 12.4% increase in sales volumes compared with the same period in 2024 and a 20.3% rise in new instructions, indicating stronger activity earlier in the year. The lettings market had recorded an 8.3% annual rise in rents in prime Central London during spring, alongside a rising average yield. However, several agents had also forecast potential rental decreases by the end of 2025, reflecting underlying uncertainty. Similarly, February 2025 had seen properties going under offer up 18.7% from the previous year, with annual rental growth at 5.0%, indicating that the quieter May results may point to a cooling phase following earlier momentum.

The £5 million-plus market had bucked broader trends during March, with a dramatic 138% increase in transactions and a surge in new instructions and stock levels, surpassing pre-pandemic averages by significant margins. Yet, this high-end segment’s strong performance has not broadly insulated the overall prime London market, which now appears more constrained by cautious buyer sentiment and persistent supply imbalances. Lettings activity, while showing some positive signs with new instructions nearing last year’s levels, is tempered by fewer agreed lets and longer times to let at the upper-tier price points.

Looking back at the market through late 2024 and early 2025, stock availability for sales had been rising steadily, alongside modest rental growth and quarterly improvements in lettings. Yet, as the year has progressed, the data suggests the prime London property market is navigating a more subdued and selective phase, with activity dampened by affordability pressures, elevated supply levels, and ongoing economic uncertainties. This evolving environment requires sellers and landlords to be increasingly realistic, while buyers and tenants are likely to remain discerning, particularly at the higher end of the market.

📌 Reference Map:

Source: Noah Wire Services