London’s prime residential property market is showing the clearest signs of recovery since the interest rate cycle peaked in late 2023, with transaction volumes in the capital’s most prestigious postcodes rising 18% in the first quarter of 2026 compared to the same period last year, according to data published by Knight Frank on Wednesday. Estate agents are reporting a marked increase in enquiries from international buyers, particularly from the Middle East, South and Southeast Asia, drawn by a combination of relatively attractive pricing following the market correction of 2024-2025 and a stable political environment.
The recovery is most pronounced in Mayfair, Knightsbridge and Chelsea, where average prices for properties above £5 million have risen 4.2% over the past six months, reversing a decline of approximately 8% from the peak of 2022. Industry observers note that the supply of high-quality properties in these neighbourhoods remains constrained, with many owners having chosen to hold rather than sell during the downturn, limiting the volume of stock available to buyers and supporting valuations.
Savills research director Lucian Cook described the market dynamic as “cautiously positive but by no means a return to the exuberance of 2021-2022.” He noted that the recovery remains firmly concentrated at the top end of the market, with properties below £1 million in outer London boroughs continuing to face pressure from elevated mortgage rates and affordability constraints affecting domestic buyers.
The lettings market in prime central London has remained robust throughout the cycle, with rental yields in Mayfair and Belgravia averaging between 3.5% and 4.2% for premium apartments. The shortage of high-quality rental stock, combined with continued strong demand from corporate tenants and diplomats, has kept rents at historically elevated levels despite a slight easing from the record peaks of 2023.
New development activity in central London remains subdued compared to historical averages, with planning approvals for residential schemes in the City of Westminster down 22% in 2025. Developers cite a combination of elevated construction costs, uncertain demand and the complexity of the planning system as reasons for their caution. The government’s planning reform agenda, set out in the Planning and Infrastructure Bill currently before Parliament, is intended to address some of these structural constraints.
Looking ahead, most analysts forecast continued gradual recovery in prime London property through the remainder of 2026, contingent on further reductions in interest rates and continued stability in global financial markets. Knight Frank is projecting price growth of between 3% and 5% for prime central London properties by year-end.
— Edward Blackwell, London Capital Post
