The conflict in the Middle East, rising inflation and domestic political instability is a thorny trifecta contributing to a dampened short-term outlook for London prime property markets, says Savills.
The high-end real estate agent cited a protracted US-Iran war as the main driver of rising borrowing costs and inflation, stymying demand across the UK capital’s prime and super-prime housing markets.
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Prime Central London - still moving, but lagging
Prices in Prime Central London (PCL) are forecast to fall by a modest -3.0% by the end of 2026, with Savills’ analysts putting the onus on political ambiguity for recent drop in home values.
London’s long standing status as a safe haven, however, is acting as a safety net against more severe price corrections, with PCL relatively buffered from higher interest rates.
PCL values are now down 25% compared to their 2014 market peak, reinforcing the UK’s appeal as a refuge for wealth.
Medium term recovery remains largely intact, with stronger house price growth expected from 2028 as inflation stabilises, mortgage rates ease and economic growth improves.
Outer Prime London market - needs-based moves create demand
Families needing more legroom and other needs-based moves are keeping London’s outer prime market in perennial demand, with Savills crediting to the market’s buoyancy thanks to buyers reliance on lower loan-to-value (LTV) products, which haven’t seen rates increase to the same extent as those with higher LTVs.
Ongoing conflict in the Middle East and renewed domestic political uncertainty will also act as counterweight to the capital’s £5m+ market, with a renewed sense of caution applying to a portion of London’s trophy market, which is typically more sensitive to economic and geopolitical uncertainty,reflected in the slowed Q1, 2026 activity in the top end price brackets.
While there is emerging evidence that the Prime Central London (PCL) market is starting to strengthen as a result of expats returning home, Savills’ figures show just 68 transactions above £5 million in Q1 2026, -35% fewer than the same quarter last year and -33% less than Q1 2024.
There were just 16 transactions in the first three months of the year in the more discretionary £10m market, down -54% on the same period in 2025 as buyers exerted caution over geopolitical risk.
Back in January, Beauchamp Estate annual ‘Billionaire Buyers’ report predicted that international buyers will represent the largest portion of London’s super prime property buyers 2026.
While that might still ring true, many of those relocating from the Gulf region – expats and wealthy Emiratis-in-flight – have adopted a ‘wait and see approach’ – diverting to the super-prime rental market, as the globally wealthy seek a short-term base in London without the commitment of buying.
London’s prime postcodes - still golden
The capital’s traditional prime postcodes saw the most demand for super-prime homes, with Belgravia outperforming PCL addresses counting 15% of all £5 million-plus sales in Q1, 2026.
Kensington (12%) and Mayfair (10%) also proved the most popular, which both retained similar proportions to 2025.
Despite political uncertainty creating unease, more bullish buyers are acting decisively when they see genuine value and opportunity, stepping in where domestic and non-dom sellers are exiting, snapping up priced-to-sell larger homes in desirable postcodes.
2028 will see price growth return
Savills expects price growth to return from 2028 onwards while a gradual recovery in values is predicted over the two-year period. This creates a strategic window for investors to invest in well-priced prime and ultra-prime London stock.
