Dec’25 property market update – Stability returns to the UK market

After a relatively slower second half of 2025, confidence in the UK housing market is improving. Earlier uncertainty came from rumours about new property taxes and changes to Stamp Duty thresholds. Buyers took advantage of this time and negotiated well as they waited for clarity. Now that these concerns have been addressed, interest rates are easing and property supply is becoming more stable. Analysts in fact are expecting prices to rise by around 3% to 5% in 2026.

London price adjustment

Zoopla’s latest data reveals that in UK, average property prices rose by 1.3% overall and the northern regions grew by about 3% thanks to factors like better affordability, limited supply and lower tax exposure. On the other hand, London and southern regions saw slight price declines.

One reason for this is higher supply, 8% to 15% more than last year. This has also given buyers stronger negotiation power. Despite this, London stands as a premium market. Rightmove’s figures show the average London price at £660,040, around 83% higher than the national average of £364,833.

Lowering prices have encouraged more transactions. The number of agreed sales is up by 4% from the end of 2024. For discerning Malaysian investors, this is a window where strong London fundamentals are still intact however purchases can be possible at more flexible prices.

Mansion tax clarifies earlier uncertainty

Many buyers have been waiting for clarity on whether around 210,000 homes priced above £500,000 would face a new tax. The Autumn Statement has further confirmed that this will not happen. Instead of this, only homes priced above £2 million will be taxed under the new annual ‘Mansion Tax’ from April 2028 onwards.

These new homes make for only 0.5% of all UK properties and the tax will start at £2,500 per year for homes between £2 million and £2.5 million and go up to £7,500 for homes over £5 million. This gives investors in central London property clear reassurance that earlier rumours no longer apply.

Signs of gradual price recovery

Experts are predicting that 2026 will see price growth as market confidence returns rapidly. Better affordability is also expected. Research shows the price to income ratio is improving to 8.2 in 2026, down from 9.5 in 2022. This marks four years in a row of improving affordability.

Investor interest in London and Reading

Benham & Reeves recently presented several luxurious Berkeley schemes to investors in Mumbai and Delhi, alongside our Managing Director, Anita Mehra. The exhibit included Reading Riverworks, Oval Village, White City Living, South Quay Plaza and The Green Quarter. All of these developments are strategically situated in high regeneration zones within London and Reading.

These sessions strengthened overseas buyers’ continuous focus on strong, well-connected areas with long-term growth potential.

Strong response to The Verdean in Malaysia

In Malaysia, buyer interest is extremely positive. Our Kuala Lumpur office hosted the launch of The Verdean, situated next to Acton Main Line Station on the Elizabeth Line (Zone 3). This contemporary development offers convenient links to central London, Canary Wharf and Heathrow. Rents in this area have risen by 28% in the past three years and the expected rental yields are around 5.5%.

In Singapore, our office showcased Lombard Square in Plumstead that offers expected rental yields of up to 6.2% as well as The Row in Abu Dhabi’s cultural district of Saadiyat Island. The success of these exhibitions indicates continued global interest in London property.

Rental income tax update from April 2027

Starting April 2027, rental income tax rates are set to rise by 2%. The basic rate will become 22%, the higher rate 42% and the additional rate stands at 47%. In practical terms, this implies about £20 more tax for every £1,000 of net rental profit. While this is a consideration, buy-to-let performance still depends on local rental demand, yield strength, occupancy and long-term planning.

London rents continue to lead the market

ONS data shows that national private rents are up by 5% to £1,360 per month. London rents rose 4.3% but remained higher at £2,265, around 67% above the UK average. This comes as the first phase of the Renters’ Rights Act begins in May 2026.

This act will also mark the removal of Section 21 ‘no-fault’ evictions and other reforms that are introduced to strengthen fairness in London’s rental sector.

Benham and Reeves supporting Malaysian investors

Since 2013, our Kuala Lumpur office has extended London’s real estate expertise to clients across Malaysia. Our highly experienced sales team ensures that discerning Malaysian investors always get the best deals when buying and selling properties in London.

Liaising with our London offices, the team can handle all formalities related to property buying, including accurate market valuations and advice on mortgage loans. Our after-sales service provides assistance with tenant sourcing, furnishing and day to day property management.

If you would like to find out more about buying, selling or letting in London, feel free to get in touch with us today.