Current Status: As of 18 December 2025, the Bank of England base rate is 3.75% and the latest UK House Price Index release (Oct 2025) puts the average UK home at £270,000 (+1.7% YoY). London is increasingly a two-speed market, with many prime/flat-led boroughs down year-on-year while several affordable, needs-based boroughs hold firmer. For buyers, this is the key shift: 2026 looks like a leverage window, but only if you buy the right product in the right micro-market.

People are asking the same question across London right now: House prices are falling and rates are easing — should I buy in 2026?

The honest answer is not a single yes or no. London has entered a market phase where timing matters less than selection. In 2026, buyers aren’t just purchasing a home, they’re underwriting an asset with three moving variables: cost of debt, deliverability / safety risk, and postcode liquidity.

This London Construction Magazine analysis explains what the latest official signals are actually saying, where buyers have leverage, what risks are being priced in (especially for flats), and how to decide if your purchase should happen now or later. 

 

Frequently Asked Questions: Buying a Home in London in 2026 

Our Answers Below

Should I buy a house in London now or wait until 2027?
If your finances are stable and you are buying for the medium to long term, waiting for a perfect bottom is rarely productive. 2026 offers more negotiating power than recent years, with softer prices and improving mortgage conditions. For many buyers, the decision should be driven by affordability, security of income and property quality — not by trying to time the market precisely.

Will London house prices fall more in 2026?
Some parts of London may see further modest declines, particularly flat-heavy areas with high service charges or unresolved building safety issues. However, most forecasts point toward stabilisation rather than sharp falls. London is expected to underperform other UK regions, which actually creates better leverage for buyers rather than signalling a major crash.

Is 2026 a good time to buy property in London for first-time buyers?
For first-time buyers with a secure income and a sensible deposit, 2026 may be one of the more balanced entry points in recent years. Mortgage rates are lower than their peak, competition is reduced and sellers are more open to negotiation. The key is buying within your means and prioritising long-term affordability over stretching for location.

What are the best London boroughs for first-time buyers in 2026?
Search and transaction trends suggest stronger first-time buyer activity in areas such as Barking & Dagenham, Lewisham, Croydon and parts of Bromley. These boroughs combine relative affordability with improving transport links and long-term demand fundamentals, making them more resilient in slower market conditions.

Is it safe to buy a flat in London under the Building Safety Act?
Yes, but only if proper due diligence is carried out. Buyers should confirm cladding status, remediation completion, service-charge exposure and building compliance documentation early in the process. Flats with clear Building Safety Act compliance and transparent management are performing far better than those with unresolved risks.

Are mortgage rates expected to fall further in 2026?
Most forecasts suggest gradual easing rather than a return to ultra-low rates. Buyers should assume mortgage rates remain higher than the 2020–2021 period and stress-test affordability accordingly. A slightly higher but stable rate environment is generally healthier than volatile, rapidly changing conditions.

Is renting still cheaper than buying in London in 2026?
In some cases, yes, but the gap is narrowing. Rising rents and more flexible pricing on purchases mean buying can make sense where mortgage costs are comparable to rent, particularly for buyers planning to stay put for several years. The calculation should include transaction costs, maintenance and long-term stability, not just monthly payments.

The macro setup for 2026: rates easing, but London still under pressure

The biggest change versus 2023–2024 is that the interest-rate shock has softened. The Bank of England cut the base rate to 3.75% on 18 December 2025, which has already flowed into lender repricing for some borrowers and improved forward affordability at the margin.

But here is the London-specific reality: even when borrowing costs ease, London affordability is still capped by incomes, so the capital often recovers slower than the UK average. This is why multiple credible market trackers continue to describe London as a two-speed market: the parts of London that depend on investor demand and flat-heavy stock can correct faster, while family-house constrained supply can remain firmer.

LCM navigation: Beyond the 3.75% Interest Rate: Why 2026 is London’s Real Test  |  What Today’s ONS Q3 Revisions Mean for London Contractors in 2026

What the official price data really implies: leverage is returning unevenly

The latest UK HPI release (Oct 2025) shows the UK average house price at £270,000 with annual growth of 1.7%. That headline is calm. London underneath it is not uniform. Market reporting based on local-area pricing shows that around half of London boroughs have been down year-on-year, while several more affordable boroughs have held up better, the definition of a split market.

If you’re buying in 2026, read that split properly: it’s not London is crashing, it’s that London is repricing risk and liquidity. Areas dominated by leasehold flats, high service charges and building-safety uncertainty tend to discover price faster when rates rise and buyers become cautious. Needs-based family markets with genuinely constrained supply tend to resist deeper falls.

Prime central London is the clearest example of repricing: research has stated that prime central values have been over 20% below the 2014 peak (in nominal terms) in recent reporting and even lower after inflation adjustment. That matters because it changes buyer psychology from overpay to win to negotiate for value.

LCM navigation: Stamp Duty Madness: Government Solves Housing by Making Moving Harder  |  Rayner’s Bold Move: London’s Housing Target Slashed  |  Labour’s Green Belt Plans Boost Housebuilders

The 2026 buyer shift: from bedrooms to risk controls

In 2026, London buyers are not just filtering by layout. They are filtering by certainty. The highest-intent due diligence is happening earlier at the Rightmove stage, not just in conveyancing.

• Leasehold / safety certainty: buyers want proof on cladding status, remediation completion and service-charge trajectory (especially for flats).
• Energy performance: EPC quality increasingly affects perceived running costs and mortgage pricing (green rate behaviour).
• Negotiability: 2026 is a market where discounts are often earned by buyers who can move cleanly (finance agreed, chain controlled, docs ready).
• Liquidity: Can I re-sell this if life changes? matters more in a slow market than in a rising market.

Flats vs Houses: why London’s split is likely to persist into 2026

London’s split market is fundamentally a product split. Houses (especially family houses with gardens and strong schools) behave like scarcity assets. Many flats behave like managed assets and 2026 buyers are far more sensitive to the ongoing operational costs and risks of managed living.

Flats face three compounding pressures: (1) service charge escalation risk, (2) building safety / documentation scrutiny and (3) buyer preference drift toward space and flexibility. None of those automatically makes flats bad, but it does mean the best flats will outperform the average flat and the weak stock will need to discount to clear.

Stamp duty and friction: the hidden cost that changes buyer strategy

In London, transaction friction is not a side issue, it changes behaviour. For first-time buyers, the current SDLT relief rules include 0% up to £300,000 and 5% on the portion from £300,001 to £500,000 (subject to eligibility). That creates obvious psychological price cliffs in London, where many properties sit above those thresholds.

This is why should I buy now? is often the wrong question. A better question is: What does the all-in cost look like versus rent, and how much discount do I need to justify the friction?

LCM navigation: Stamp Duty Madness: Government Solves Housing by Making Moving Harder

The LCM decision framework: when 2026 is a yes (and when it’s not)

The best buyers in 2026 are not trying to time the exact bottom. They are buying when the fundamentals work and the asset risk is controlled. Use this filter:

• Time horizon: you plan to stay 5–7 years+. Shorter horizons are more exposed to volatility and selling costs.
• Stress test: you can afford payments if rates temporarily rise again (many buyers stress test at 6–7% to be safe).
• Deposit + buffer: you keep an emergency fund after completion (aim for 6 months of essential costs).
• For flats: you have clarity on cladding / remediation status, service charge trajectory and building documentation.
• For houses: you are not overpaying for perfect; you are buying scarcity in a good micro-market at a rational price.

Red flags in 2026 are simple: buying because you fear missing out, stretching because you assume rates will keep falling and purchasing flats with unresolved building or service-charge uncertainty.

Key takeaway

2026 can be a very good time to buy a home in London, because leverage is returning and the market is increasingly rational. But London is not moving as one. The winners will be buyers who: understand which micro-markets are liquid, price risk correctly (especially for flats) and use the slower market to negotiate clean, evidence-backed deals.

If you want one sentence to hold onto: In 2026, you don’t win by rushing, you win by underwriting properly.

 

Expert Verification & Authorship: Mihai Chelmus Founder, London Construction Magazine | Construction Testing & Investigation Specialist