Prime central London property prices rose in the three months to September, recording the first quarterly increase in four years as the capital’s top-end housing market showed its firmest signs yet of turning a corner, new figures from Knight Frank show.
Values across prime central London (PCL) climbed 0.3% in the quarter, the estate agent’s September index found, while the annual decline narrowed to 2% — the smallest yearly fall in 18 months.
The message of the research, published today, is that this year has proved the theory that the mere absence of bad news is enough to fuel demand. A mood of cautious hope took hold in the first two months of 2026, the report says, as the uncertainty of last November’s Budget faded and mortgage rates drifted towards 3.5%.
That momentum stuttered in March, when the outbreak of the Middle East conflict pushed mortgage rates closer to 4.5% and activity faltered. But demand strengthened again as the war faded from the front pages — helped, Knight Frank says, by mortgage offers that pre-dated the conflict and a desire among buyers to act before those offers expired.
September brought a more mixed picture. Renewed tensions in the Middle East pushed mortgage costs higher again in the middle of the month, while the Budget moved back into view after a front-page report in The Times two weeks ago about a possible cut to the high-value council tax threshold. The negative headlines are back, the report notes — the question is for how long.
The issue feeds into a wider debate about how the capital’s housing is taxed. The Resolution Foundation recently estimated that London underpays £3.1bn a year in property tax, while Hammersmith & Fulham has warned that council tax could soar under the Government’s Fair Funding shake-up.
Beyond the centre, prime outer London (POL) — where demand has been more consistent and driven by people buying homes to live in — saw prices fall 0.6% in the year to September. Values there have not moved by more than 1% in either direction since May 2025, underlining how steady the market has been beyond the most expensive postcodes.
Transaction numbers also steadied as the backdrop improved. Exchanges across prime central and prime outer London in the year to September were 2.5% down on the previous 12 months, Knight Frank’s data shows — a marked improvement on the equivalent 14% drop recorded in March.
The super-prime market — homes changing hands for more than £10 million — followed a similar pattern. It came under particular pressure after the scrapping of non-dom status in April 2025, but there were 121 transactions above £10 million in the year to September, equalling the previous year. Total spending in that bracket was 14% higher, reaching £2.4 billion.
That followed a period of declining activity which bottomed out last November, when just 106 transactions were recorded over the previous year — down from 155 in the 12 months to November 2024. The super-prime market has not bounced back to 2024 levels, the report says, but it has stabilised.
Knight Frank’s head of London sales, Liza-Jane Kelly, said a change of outlook from both buyers and sellers had helped support activity. “We are starting to see sellers become more realistic with their price,” she said. “Some have been on the market for several years and want to get on with their lives. They have accepted the more difficult mortgage landscape facing buyers and the fact that the political reality won’t change in the short-term.”
“Meanwhile buyers, some of whom have been renting, are sensing value after the price declines of the last decade. What this year has clearly shown is that underlying demand strengthens quickly when the negative news fades.”
There is still a long way back. Average prices in prime central London are down 22% from their last peak in August 2015, the index shows — a reminder of how far values fell during a decade of political turbulence and tax changes.
What it means for buyers and sellers
For buyers, the figures suggest the long window of falling prices in the capital’s most expensive postcodes may be starting to close — at least in central London, where the first quarterly rise in four years hints the bottom could be in. For sellers who have been holding out for a better market, Kelly’s remarks point to a pragmatic shift: realistic asking prices are increasingly being met by returning demand, particularly from renters who see value after years of decline. In prime outer London, where prices have barely moved for more than a year, neither side appears to be in a rush — a steadiness that tends to suit families buying for the long term rather than speculators.
What to watch next
Two dates will decide whether the negative headlines recede or multiply in the final three months of the year, the report says. The first is the Budget on 28 October, which should bring clarity on taxation — including any move on the high-value council tax threshold flagged by The Times. The second is the US mid-term elections on 3 November, after which the political pressures shaping the Middle East conflict may shift, potentially lifting some of the fog around the outlook for mortgage rates. Londoners have already had a taste of how quickly sentiment can change: every time the bad news faded this year, demand picked up. The Budget will also be watched for what it means for housing supply: London boroughs have lined up plans for 50,000 new council homes — if ministers find the cash.
