Key Takeouts from Lonres Prime London Property Report – February 2025
The February 2025 issue of the Lonres Prime London Market Monthly Briefing was out this week, and as always provides a very helpful and in-depth analysis of the current trends in London’s prime real estate sector.
The market has seen a mix of positive and challenging indicators, including rising property instructions, increased under-offer numbers, combined with persistent challenges in the rental sector due to low stock availability.
Key Points & Market Trends:
1. Mixed Signals in the Prime Sales Market
January 2025 began with a strong pipeline of properties going under offer, signalling healthy sales activity.
However, sales transactions remained relatively stable, with a marginal 2.0% decline compared to January 2024.
Fall-throughs increased significantly by 45% year-on-year, raising concerns about deal completion rates.
2. Stabilising Sold Prices
Average sold prices fell slightly by 0.3% annually, marking the best performance since mid-2023.
Despite this, current price levels remain 1.6% lower than pre-pandemic (2017-2019) averages.
Central London markets continue to underperform, with prices in areas such as Mayfair and Chelsea approximately 5% lower than in January 2020.
3. Growth in New Instructions & Stock Levels
New sales instructions increased by 21.9% compared to January 2024 and were 30.3% higher than pre-pandemic levels.
Available stock for sale was 13.2% higher than a year earlier and 40% above January 2020 levels.
Price reductions surged by 63.7% compared to last year, indicating that sellers are adjusting expectations to compete in the market.
4. Subdued Transactions in the £5m+ Market
The high-end market (£5m+) saw transactions drop by 68% compared to January 2024.
The number of £5m+ properties available for sale rose by 22.8%, though new instructions in this segment fell slightly (-1.2% annually).
Properties in this category achieved just over 90% of their original asking price, an improvement over previous years.
5. Rental Market Tightens Amid Supply Shortages
Annual rental growth increased to 5.0% in January, the highest since November 2023.
Average rents now stand 32.2% above pre-pandemic levels, reflecting increased demand and limited supply.
The number of lets agreed fell by 9.8%, and new rental instructions dropped by 27.5%, exacerbating the supply-demand imbalance.
6. Significant Decline in Rental Property Availability
The total rental stock in prime London decreased by 21.0% year-on-year.
Rental properties priced under £750 per week saw a 32% reduction in supply, now 70% lower than five years ago.
Higher-end rentals (£2,000+ per week) had a more stable supply, with only a 1% annual decline and a 10% drop compared to five years ago.
7. Increased Buyer Activity but Caution Over Fall-Throughs
The number of properties going under offer rose by 18.7% annually and 37.9% compared to pre-pandemic averages.
Despite this, the increasing trend in fall-throughs (45% rise) suggests that some buyers may struggle to complete transactions due to market uncertainty.
8. Sellers Adjusting Expectations with More Price Reductions
A growing number of sellers have reduced asking prices to attract buyers, with price reductions rising by 45% compared to pre-pandemic levels.
The proportion of sold properties that were reduced in price before selling stood at 39.7% in January.
9. Rental Demand Driven by Market Uncertainty
Tenants face higher competition due to reduced rental stock, with discount levels narrowing from 4.4% to 4.0%.
The rental sector is absorbing some potential buyers who are delaying purchases due to high borrowing costs and market conditions.
10. Central London’s Underperformance Compared to Fringe Areas
While prime and fringe areas (such as Notting Hill and Fulham) have seen values rise by around 10% since January 2020, prime central London has struggled, with values down approximately 11% over the last 18 months.
In summary, the start of 2025 can definitely be viewed with a mixed outlook in the prime London real estate market.
In terms of sales, while the number of new instructions and under-offer properties indicate strong buyer interest, challenges persist, including an increase in fall-through rates and price reductions. The £5m+ market remains weak, though a rise in under-offer properties suggests potential recovery.
The rental sector however, remains particularly tight due to supply shortages, driving up rents.
Overall, despite economic uncertainty, the resilience of the prime London market is evident, with stable pricing trends and continued demand in the lower and mid-range property segments. Investors and sellers should remain cautious but proactive in adjusting pricing strategies to remain competitive.