Current Status: The Bank of England cut the base rate to 3.75% on 18 December 2025. The latest UK House Price Index (Oct 2025) puts the average UK home at £270,000 with annual growth of 1.7%. London remains a two-speed market (many boroughs down YoY, several affordable boroughs firmer), meaning buyers have more leverage, but only if they buy the right product in the right micro-market.

The question buyers keep typing right now is simple: Will London house prices fall more in 2026?

London Construction Magazine’s evidence-led view: some parts of London can still drift lower in 2026 — but it will not be London as one. The direction and depth of any further falls will be decided by micro-market liquidity, running-cost risk (especially for flats) and the ongoing repricing of certainty in the delivery system.

If you want the full context behind the delivery system signal, read the main analysis first: Why London house prices are falling and what the delivery system is signalling for 2026

Why prices can still fall in 2026 (even if rates ease)

Rate easing improves affordability at the margin, but London’s price level is still constrained by incomes and confidence. So the question becomes: where is the market still overpriced relative to buyer risk appetite?

In 2026, further falls are most likely where buyers perceive one of these three pressures:

• Liquidity pressure: sellers need to move, but the buyer pool is thin (high asking prices + slow demand = discounting).
• Running-cost pressure: high service charges, uncertain major works, or visible insurance escalation (flat-heavy stock is exposed).
• Certainty pressure: unclear building documentation and unknown unknowns (buyers price uncertainty aggressively in slow markets).

Where the downside risk is highest in London (2026)

London’s next leg (if there is one) is likely to be led by segments, not borough headlines. The most exposed segments typically share one trait: buyers can replace them easily (lots of comparable listings) or buyers fear future costs.

• Leasehold flats with unclear cost trajectory: where service charge / major works risk is not transparent early.
• Buildings with compliance uncertainty: where paperwork, remediation status, or responsibility lines feel messy to a buyer.
• Lifestyle premium stock: where the asking price is still anchored to peak-era optimism, not 2026 buyer logic.
• Over-supplied pockets: where too many similar units chase the same demand pool (discounting becomes the clearance mechanism).

On the other side of the split, scarcity behaves differently. Family houses, strong school catchments and transport-led micro-locations often hold firmer because the supply is structurally tight.

The three scenarios LCM is watching for 2026

Rather than pretending we can call a single outcome, LCM frames 2026 as three practical scenarios:

• Scenario A: Soft drift (most likely in a slow market) — prices edge down in weaker segments; good stock stabilises first.
• Scenario B: Flatline + split — London overall looks stable, but the gap widens between compliant/liquid assets and high-risk stock.
• Scenario C: Rebound in the best micro-markets — affordability improves, and demand returns first to obvious value locations and scarcity houses.

Notice the common point: in all scenarios, the best assets do not wait for the weakest ones to recover. This is why should I wait? is often the wrong lever — the market does not move together.

Signals to watch (what will tell you if further falls are coming)

If you want a buyer’s dashboard for 2026, watch these practical signals:

• Asking-price reductions: rising reductions usually signal sellers meeting reality (a leading indicator of price movement).
• Time-to-sell: if good homes start taking longer, liquidity is tightening across the board.
• Mortgage pricing spreads: when lenders widen pricing by LTV and risk, it hits marginal buyers first.
• Service-charge narratives: increasing buyer avoidance of high charges often forces sharper discounts in flats.
• Chain fragility: more failed chains and re-lists typically mean the market is still clearing.

So… will London prices fall more in 2026?

They can, in parts. The more accurate statement is: London will keep repricing risk in 2026.

That means buyers should not shop with a single London headline in mind. Shop with a risk lens: liquidity, running costs, compliance clarity and the probability you could resell if life changes.

If you want the decision framework piece that links directly to this question: Should I buy a house in London now or wait until 2027?

Key takeaway

In 2026, the best question isn’t will prices fall? — it’s: What discount (or value) do I need to justify the risk of this specific home?

Because in a split London market, the buyers who win are the ones who: price uncertainty correctly, avoid hidden running-cost traps, and buy liquid assets at rational terms.

image: constructionmagazine.uk

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