Disclaimer: This article is for general information only and does not constitute investment, tax, or legal advice. London house-price data, stamp duty rules, and non-dom tax treatment change frequently; always verify the latest figures from the ONS, Nationwide, Land Registry, and HMRC before making financial decisions.
We first published this piece in November 2018. Our thesis then was simple and, we thought, well-supported: London house prices would continue to fall in real terms over the following twelve months, with a risk of significant nominal falls if the Brexit transition turned messy. Seven and a half years on, we can finally hand in the report card. The real-terms call was right. The nominal call was mostly wrong. And the things that ultimately shaped London’s trajectory — COVID, a stamp duty holiday, the non-dom reforms, and a permanent repricing of overseas demand — barely featured in our 2018 reasoning. Here is what we said, what actually happened, and what the capital’s market looks like in April 2026.
What we said in November 2018
The original piece built its case on four observations. The average London property price had hit £482,241 in September 2018, up 90.5% from £253,093 in January 2009 — a decade of house-price inflation that had far outrun wages. Kensington and Chelsea, the priciest borough, had a median house-to-earnings ratio of 40.7x. Rightmove was reporting average falls of over £5,000 in November 2018 for London specifically. And Brexit, still two-plus years from actually happening at that point, hung over everything.
The prediction that followed: real-terms falls over twelve months, with nominal downside if Brexit went badly.
What actually happened: a surprisingly resilient nominal market
The Land Registry series for Greater London tells the nominal story:
- Nov 2018: ~£480,000
- Jan 2020 (Brexit deal day): ~£475,000
- Mid-2021 (stamp duty holiday peak): ~£510,000
- Mid-2022 (rate-cycle peak): ~£540,000
- Early 2024 (post-mini-budget trough): ~£510,000
- Q1 2026: ~£525,000 per HM Land Registry
In nominal terms, the average London property is worth about 9% more than it was when we wrote the 2018 piece. That is not a fall. It is also, by some margin, the weakest regional performance in the UK over the period. The rest of the UK, excluding London, posted nominal gains in the 35–45% range over the same window.
The real-terms call, though, was absolutely correct. UK CPI is up approximately 28% between November 2018 and March 2026. A 9% nominal rise against 28% cumulative inflation is a real-terms decline of roughly 15% in the London average over seven and a half years. For prime central London (Kensington, Chelsea, Westminster) the real-terms decline is closer to 30% — a large and durable repricing that has unfolded at a stately pace rather than in a single correction.
The four forces that actually shaped London
1. Brexit: less dramatic than feared, more consequential than expected
The Brexit we worried about in 2018 did not deliver the currency crisis or the orderly-withdrawal-collapse that would have produced a nominal London rout. Sterling did weaken, transition was choppy, but the January 2020 exit and the December 2020 trade deal were both less disorderly than the 2018–2019 Commons standoffs implied. What Brexit did deliver was a steady drain of EU financial-services professionals and a cooling of the “capital of Europe” narrative that had been central to London’s prime-market premium. That drag showed up in prices gradually, not dramatically.
2. COVID and the stamp duty holiday
The biggest short-term driver we didn’t anticipate was the March 2020 lockdown and the stamp-duty holiday that ran from July 2020 to September 2021. The holiday exempted the first £500,000 of any purchase from stamp duty until June 2021. For London, a market where most transactions are well above the threshold, the saving per buyer was large enough to meaningfully change the bid, but the “race for space” story — young families leaving flats for gardens — hurt prime central London more than it helped. Outer London and the commuter belt outperformed the inner boroughs for the first time in a generation.
3. The rate cycle and the 2022 mini-budget
London is disproportionately exposed to higher interest rates because of its higher average loan size. When the Truss–Kwarteng mini-budget of September 2022 sent five-year fixed mortgage rates from around 4% to 6.5% in a matter of weeks, affordability for London’s buyer profile (higher income, higher loan, longer commute tolerance) compressed more sharply than for lower-priced regions. The 2023 correction we lived through, described in more detail in the 2023 UK house-price piece, hit London early 2024 prices noticeably.
4. The non-dom reforms: the really big one
This is the structural change that our 2018 framing missed entirely, and that has probably done more than any single factor to drain the prime central London premium. From 6 April 2025, the UK’s centuries-old “remittance basis” for non-domiciled residents was replaced with a four-year Foreign Income and Gains regime, with worldwide income and gains brought into UK tax after year four, and inheritance tax extended to worldwide assets after ten years of UK residence.
The practical effect on the prime central London market has been profound. Knight Frank reported a 23% drop in prime central London transactions in the year ending March 2026 versus the prior year, with asking-price discounts on £5m+ properties averaging 9–12%. Non-dom Russian, Middle Eastern, and Hong Kong buyers — the demand legs we identified in 2018 as propping up the top of the market — have materially retrenched. Italy, Greece, Portugal, and the UAE are the main beneficiaries.
Where London sits in April 2026
The capital’s housing market now has three distinct layers.
Prime central London (PCL) — broadly Kensington, Chelsea, Westminster, Belgravia, Knightsbridge, Mayfair, Notting Hill — is in an ongoing real-terms correction driven by non-dom reforms and thinner overseas demand. Nominal prices are down roughly 5–10% from the 2022 peak. Transaction volumes are at multi-decade lows. For the patient cash buyer, this is the first genuinely interesting PCL market in fifteen years.
Outer London and the commuter belt is flat to very slightly positive. The Outer South East region posted -0.7% annual growth in Q1 2026 per Nationwide — the only UK region in annual decline. The stamp-duty reset in April 2025 (nil-rate threshold for first-time buyers dropping from £425k to £300k, relief ceiling from £625k to £500k) hit this band hardest of all, because so many of its typical purchases sit in the £400–500k range.
The “in-between” zones — Clapham, Islington, Hackney, Brixton, Walthamstow — have held up relatively well, with nominal prices roughly flat and a healthier transactional market than PCL. These are the areas still attracting professional buyers on two-income mortgages. We’re seeing many 30+ year mortgage terms, the BoE’s latest lending data showing 62% of first-time buyers nationally now on 30+ year terms and Greater London running above that.
What the 2018 piece got right, wrong, and missed
Fair self-assessment:
Right: the real-terms thesis. London has genuinely become cheaper in real terms, by roughly 15% at the average and 30% at the top. The affordability logic we laid out in 2018 was sound.
Wrong: the twelve-month window. Housing cycles are much longer than that, and London specifically tends to work in five-to-ten-year regimes rather than year-on-year falls. The nominal flatness that has actually delivered the real-terms correction unfolded over seven years, not one.
Missed: the non-dom reforms, the COVID supply shock, the stamp-duty holiday, the Truss event, and the peculiar durability of London’s nominal floor. Each of those ended up being a bigger moving part than anything we listed in 2018.
What to do with London exposure in 2026
Three practical takeaways.
For buyers with patience and cash, prime central London is genuinely interesting for the first time in a long time. Asking-price negotiability is back. The non-dom correction has created real room to transact below asking on £2m+ properties, particularly those held by overseas sellers looking to reposition. The thin market cuts both ways, though — resale liquidity will be weaker than London buyers are used to.
For leveraged buyers, the arithmetic is less forgiving than it was pre-2022. Five-year fixed mortgages at 5.50–5.75% mean a typical £500k Outer London purchase costs materially more per month than the same house at 2% in 2021. The combination of April 2025 stamp-duty reset + higher rates + flat nominal prices makes “wait and see” a more defensible stance at this income band than at any point since the mid-2000s.
For investors in the buy-to-let segment, London has become progressively less workable. We’ve tracked the policy trajectory in the buy-to-let piece, and for higher-rate UK taxpayers the after-tax yield on incremental London buy-to-let purchases is now typically below what’s available on well-structured French investment property. Our France buying guide and SCI walkthrough are the starting points for that route.
Frequently asked questions
What is the average London house price in 2026?
Greater London is averaging roughly £525,000 in Q1 2026 per HM Land Registry, broadly flat on the prior year. Prime central London (Kensington, Chelsea, Westminster) is down 5–10% from its 2022 peak, while Outer South East London is the only broad UK area in annual decline (-0.7%).
Did London house prices fall after Brexit?
In nominal terms, no — they went roughly sideways. In real terms, yes. London is now about 15% cheaper than it was in late 2018 once inflation is accounted for, and prime central London is closer to 30% cheaper. The “Brexit crash” didn’t arrive as a dramatic nominal drop; it unfolded as persistent real-terms erosion.
Have the non-dom reforms hurt prime central London?
Yes, materially. The April 2025 replacement of the remittance basis with a four-year Foreign Income and Gains regime has cut prime central London transaction volumes by about 23% year-on-year and pushed asking-price discounts on £5m+ properties into the 9–12% range. Wealthy non-doms have moved decisively to Italy, UAE, Portugal, and Greece.
Is now a good time to buy in London?
It depends on segment. For patient cash buyers, prime central London offers the most genuinely interesting prices in 15 years. For leveraged buyers in the £400–600k Outer London band, the stamp-duty reset plus higher mortgage rates make “wait and see” more defensible. For investors in buy-to-let, London’s after-tax arithmetic is now among the weakest in the UK.
What happened to London’s house-price-to-earnings ratio?
It has come down meaningfully but remains historically stretched. Kensington and Chelsea’s 40.7x ratio in 2017 has eased toward the low 30s as wages have caught up with flat nominal prices. At the Greater London level, the ratio is now in the low-to-mid teens rather than the mid-to-high teens it peaked at — still well above the long-run UK average of around 8x.
Are London rental yields still viable for landlords?
Gross rental yields in Greater London have recovered modestly from 2021 lows as rents have outpaced sale prices, but after-tax returns for higher-rate UK taxpayers remain under pressure due to Section 24, higher SDLT surcharges on additional properties, and EPC-related upgrade costs. Many UK landlords have been reducing London exposure or switching to cross-Channel alternatives.
Bottom line
In November 2018 we said London house prices would continue to fall in real terms, with possible nominal falls if Brexit went badly. The real-terms call landed. The nominal call didn’t, largely because the shocks that actually arrived (COVID, stamp-duty holiday, non-dom reform) had a very different shape to the Brexit-collapse scenario we were hedging. The outcome — a slow, orderly real-terms repricing of about 15% across London and 30% at the top — has delivered the affordability improvement the 2018 piece was hoping for, just not in the way we expected.
Related reading
- UK house prices in 2026: the market that stopped inflating — the national picture and rate-path outlook.
- The 2023 UK house-price slide revisited — how the post-mini-budget correction actually played out.
- How the government squeezed the buy-to-let market — the tax and regulatory trajectory for landlords.
- Buying property in France: a complete guide for British investors — the cross-Channel alternative.
- How to create a Société Civile in France — the vehicle most UK investors use for French property.
