Price growth returned to the prime London sales market in February 2025, while lettings activity fell and rents continued to rise, according to LonRes.
LonRes data showed a rental growth increase of 6.0%, the highest rate since November 2023, with average rents 33.3% above the pre-pandemic average.
However, lets agreed dropped by 42.1%, and new instructions fell by 29.4%, both below pre-pandemic levels.
The rental property stock was 19.9% lower than last year.
New sales instructions in February were significantly higher than the previous year, with a 24.0% increase, and 47.5% above the February average from 2017 to 2019.
The supply of available homes for sale also grew, with stock 11.6% higher than the previous year and 37.5% above February 2020 levels.
Achieved prices saw a modest annual rise of 0.6%, the first increase in over 18 months.
However, values were still 1.2% below pre-pandemic levels.
Additionally, sales transactions in February were 8.4% fewer than the prior year but 6.8% more than the February average from 2017 to 2019.
Under-offer numbers rose by 11.0% annually, and 18.8% above the pre-pandemic average.
The £5m+ sector saw 13.8% more transactions than the previous year, while new instructions rose by 30.0%.
Nick Gregori, head of research at LonRes, said: “The main headline for February was that sales values across prime London recorded an annual increase for the first time since June 2023.
“While it’s only a single month of data and a small rise (+0.6%), a sign of return to growth might motivate buyers to become more active.
“This in contrast to a long period where demand has been depressed by fears of further price falls.”
Gregori added: “However, the number of homes on the market is likely to mitigate against significant price growth, with 11.6% more stock for sale than a year ago meaning buyers have more choice and therefore more negotiating power.
“Transaction levels for the year so far are broadly in line with the same period in 2024, but under offers are up significantly, potentially indicating rising activity in the coming months.
“The outlook for values over the remainder of 2025 also continues to be impacted by expectations around borrowing costs.”
He said: “Recent reductions in mortgage rates have led to improving mainstream property markets around the UK, potentially boosted by the ending of a stamp duty discount.
“While the prime London markets are less directly affected by these factors, they do feed into wider positive sentiment.
“However, rising inflation in the UK may slow the pace of future interest rate cuts.”
He added: “As expected, transactions recovered in the £5m+ market after a slow January, but rising numbers of new instructions continued to add to the stock of homes for sale, with annual growth of 21.1%.
“Drilling down into this data, we have seen similar increases for all prime central neighbourhoods but a big difference between property types – the number of £5m+ flats on the market has grown at triple the rate for houses over the past 12 months.”
He said: “The prime London lettings market continues to be constrained by a lack of stock.
“Robust demand and low levels of new supply are sure to put upward pressure on rents so it’s no surprise that annual rental growth increased to 6.0% in February, the highest rate for 16 months.
“Within this average figure, larger properties are leading the way – flats with three or more bedrooms have seen the strongest annual growth and houses have been outperforming more generally since the pandemic.”
