In short: Average London house prices fell 3.3% in the twelve months to February 2026 according to the latest UK House Price Index — a sharper drop than any other English region at a time when the broader national picture had appeared to be stabilising. The Royal Institution of Chartered Surveyors recorded its weakest new buyer enquiries reading since 2023, while Knight Frank cut its 2026 UK forecast from 3% to 1.5% growth.
The capital’s housing market is experiencing its most sustained period of stagnation in years, with the combination of stubbornly high mortgage rates, the inflationary impact of the US–Iran war on energy costs and political uncertainty at Westminster producing a toxic mix for buyers and sellers alike. London affordability was already stretched before any of the current headwinds emerged; the deterioration of the past three months has tipped a difficult market into something approaching a buyers’ standoff.
The ONS House Price Index data, released on 14 May, confirmed that prices in the capital fell 3.3% in the year to February 2026 — the sharpest decline of any English region. The national picture remained marginally positive: average UK house prices rose 1.2% over the same twelve-month period, supported by stronger performance in Northern Ireland, Yorkshire and the Humber, and the North East.
RICS paints a bleak picture
The most sobering reading came from the Royal Institution of Chartered Surveyors’ April survey. New buyer enquiries fell to a net balance of minus 39% nationally in March — the weakest figure since August 2023. Agreed sales dropped from minus 13% in February to minus 34% in March, the softest reading since the summer of that same year.
The one note of cautious optimism was the RICS twelve-month sales expectations measure, which remained positive at plus 2%. That suggests practitioners still believe conditions will improve once the current macro uncertainty resolves. But analysts tracking the index were direct in their warning to clients: “Life is likely to get even tougher for sellers in the coming months, as mortgage rates threaten to keep rising and sentiment cools,” Sarah Coles of AJ Bell said.
Knight Frank slashes its forecast
The mood among forecasters has shifted sharply since the start of the year. Estate agent Knight Frank now expects UK house prices to grow by just 1.5% in 2026, down from a prediction of 3% made in September 2025. The firm continues to forecast 3% growth in 2027 and 4% in 2028, but those projections rest on assumptions about the Iran war and inflation that look increasingly fragile.
Halifax data showed UK prices falling 0.5% in March and a further 0.1% in April — two consecutive monthly declines that ended a brief stabilisation seen at the start of the year. Zoopla, by contrast, reported the average UK property at £271,700 in March, up marginally from £270,500 in February, with prices “rising despite turbulence in the housing market.”
The rental sector under pressure
The rental picture overlays its own set of pressures on top of the sales market deterioration. Landlord instructions have remained consistently negative throughout 2026, with the March RICS survey recording minus 27%, pointing to a continuing reduction in available rental stock as smaller portfolio landlords exit the sector.
The Renters’ Rights Act has accelerated that exit, particularly among landlords who locked in 10-year fixed-rate buy-to-let mortgages at the ultra-low rates of 2016 and are now rolling onto current market rates. From April 2027, the basic rate of tax on rental income rises from 20% to 22%, with the higher rate moving from 40% to 42% — a structural shift that no rent increase is likely to offset for many smaller investors.
What recovery would require
The conditions for a London recovery are easy to specify and difficult to assemble: a decisive end to the Iran war, a meaningful fall in oil prices, swap rates moving back below the levels of late 2025, the Bank of England resuming rate cuts, and Westminster delivering a stable government with a clear fiscal direction. None of those five preconditions looks likely to materialise simultaneously before the autumn.
For buyers, that argues for patience and for hard negotiation. For sellers, particularly in the £1m–£2m bracket where the impending mansion tax adds an extra deterrent, the message is the one estate agents have been delivering quietly for months: take the offer if you can find one, and do not assume that next year will be better than this one.
