Knight Frank has issued its analysis of London’s sales and lettings markets in the year to July 2025 and found the biggest gulf in price performance eight years – but has some optimism for the rest of the year.
The sales market in the Capital is more split than it has been since Brexit, it says. While the average PCL price fell 3% in prime central London (PCL), there was an increase of 0.6% in prime outer London (POL). The last time the gap was wider was in 2017, which was put down to market correction after the EU vote in June 2016.
The average number of exchanges in south-west London in the first seven months of this year was 1% below the five-year average. For the PCL market, the equivalent decline was 10%.
Luke Ellwood, head of south-west London sales at Knight Frank, commented: “Buyers will generally jump on a property if it’s priced correctly. We are currently not far from last year’s position, which was a record 12 months for us.”
Average prices in PCL are 20% below their last peak in August 2015, the report says, which compares to an equivalent decline in POL of 7% since mid-2016.
There were 6.7 new buyers for every new sales instruction in July in PCL and POL, which was lower than a figure of 7 in July 2024, but an improvement from 5.1 in April this year.
It is still a buyer’s market across most of the capital due to high levels of supply. An overhang from the stamp duty cliff edge, decisions put off due to last year’s general election and a growing number of landlords selling up are among the causes.
However, the picture is slowly improving as the distortive effect of April’s stamp duty increase passes through the system.
“Some buyers have now been to places like Italy and Dubai and realise they still want a long-term base in London”, said Stuart Bailey, head of prime central London sales at Knight Frank. “When they see prices in Belgravia within 10% to 15% of areas like Fulham it is tempting some of them to look in more central areas.”
In the lettings market, Knight Frank has seen demand from the corporate relocation sector in London and the surrounding area holding firm. In fact, the data shows that in the first seven months of this year, the number of enquiries from companies looking to send staff to the UK has grown by some 8.5% from the same period last year.
These corporate relocations to the UK are most commonly from the energy, finance, professional services, legal and tech sectors, the data shows. Tech giants including Meta, Apple and Amazon recently posted strong financial results, sustaining their demand, and in the legal sector, a number of US law firms have expanded their London presence as a strategic European hub for mergers and acquisitions activity, the report says.
“London is still seen as a premier location to send staff,” said John Humphris, head of relocation and corporate services at Knight Frank. “There is a critical mass of talent already here that pulls people in, as well as the appeal of the language and time zone.”
There’s growing demand from international students too, according to UCAS figures, with an increase of 2.2% in the number of overseas students in the last 12 months, the largest being the USA (+14%) and China (+10%).
Average PCL rents 1.7% in the year to July – the strongest increase in a year, while in prime outer London, a rise of 1.8% was the strongest since October 2024.
The findings also show that landlords are exploring a sale due to the tougher regulatory environment, with the prospect of stricter energy efficiency rules and the Renters’ Rights Bill could make it more onerous to regain possession of a property as well as raising the risk of void periods. The number of new lettings instructions in the year to July was 9% lower than the previous 12-month period in London, the report says.
The report concludes “Healthy demand and tighter supply means we expect rental value growth to keep climbing through the rest of this year.”
Read the orginal article: https://propertyindustryeye.com/cautious-optimism-from-knight-frank-for-pcl-and-pol-markets/
