London luxury property market extends slump as Iran war knocks confidence
London’s luxury property market continued its slump in February as market confidence took a hit from the Iran war just as it began to recover from last year’s Budget.
There were 31 per cent fewer sales for prime properties – which defines those in the top five per cent of the market – this February than in the year before, according to property data firm LonRes.
A sluggish prime London market is unlikely to be helped by the 250 high-end properties which are set to flood estate agents following the collapse of MFS, a shadow bank which gave loans to ownership vehicles for homes in Mayfair, Kensington and Belgravia.
Sluggish sales activity was matched by falling values, as the price of completed prime sales fell by 10 per cent year on year.
As sales activity and asking prices fall, the stock of luxury homes on the London market increases – the number of available homes worth more than £5m grew by 10 per cent in the 12 months to February.
The number of sales instructions indicates homeowners are opting to wait for a more favourable market, as 5.4 per cent less owners of prime properties triggered sales this February than in 2025.
In the luxury rental market, however, activity grew by more than a third as rents fell by 0.5 per cent.
‘Out of the frying pan and into the fire’
Nick Gregori, head of research at LonRes, said the delay in property data means these sales figures likely reflect the hit to market confidence dealt during the period of speculation which led up to last year’s November Budget.
But further market uncertainty is around the corner, Gregori said: “It may be a case of ‘out of the frying pan and into the fire’, for as soon as the Budget’s impact on the market was absorbed we now have further economic uncertainty introduced by the conflict in Iran.”
Lenders responded to the conflict in Iran by pulling mortgage deals at the fastest rate since 2022, as the Royal Institute of Chartered Surveyors warned the conflict is dampening consumer sentiment.
“London’s status as a safe haven is typically boosted whenever there is conflict or political upheaval elsewhere in the world, but tax and policy changes have in general made it significantly less welcoming for international high net worth individuals,” Gregori said.
Hundreds of properties in top-end locations like Grosvenor Square and Portland Place are set to enter the market after the collapse of MFS.
Jessica Moreton, director of real estate firm Sotheby’s, told Morning Wire this new stock could end up saturating the market and knocking prices.
“What appears to be a surge in supply is, in truth, a liquidity-driven release at the top end. […] In prime London, confidence underpins value,” she said.
Roarie Scarisbrick, a director at Property Vision, told Morning Wire the impact of this new stock depends on its quality.
“If it comes up and it’s expensive and not very high quality, it will just be added to the pile of things that are in the market which fall into that category,” he said.