Property transactions across prime London have remained resilient despite rising borrowing costs and renewed pressure on mortgage rates.
Knight Frank data shows sales across prime central London (PCL) and prime outer London (POL) were 2% above their five-year average in the three months to August.
Transaction numbers were also 18% higher than a year earlier, although activity in 2025 was affected by greater uncertainty around tax changes.
Prime outer London recorded the stronger performance. Transactions were 10% above their five-year average, compared with an 8% decline in PCL.
However, activity in central London has improved compared with last year. Sales in PCL during the three months to August were 6% higher than in 2025.
The figures come despite renewed pressure on borrowing costs.
UK government bond yields have risen amid concerns over inflation, government debt and the Middle East conflict. The yield on ten-year UK government debt moved above 5.2% last week.
Higher bond yields have also put upward pressure on mortgage pricing.
Tom Bill, head of UK residential research at Knight Frank, commented: “Government borrowing costs have risen across developed countries as investors become concerned about inflation risks and debt burdens against the backdrop of the Middle East conflict.”
Bank of England figures showed mortgage approvals fell to their lowest level since January 2024 in July.
Despite this, the wider housing market has remained relatively resilient. UK residential transactions in July were only 1% below last year’s level and 4% higher than in July 2024, according to HMRC figures.
Bill added: “Following two summers of speculation ahead of the autumn Budget, the new administration should be commended for the absence of media stories about which taxes could rise.
“That doesn’t mean, of course, that chancellor John Healey won’t make changes to high value council tax rates in the Budget, for example.
“The relative calm has enabled both cash buyers and mortgage holders to activate their plans as mortgage rates have steadied, at least before the upwards pressure increased this week.”
Looking ahead, concerns include the abolition of the non-dom tax regime, the higher stamp duty surcharge on additional properties and speculation over future wealth taxes.
Knight Frank said some buyers were responding to the uncertainty by negotiating harder rather than abandoning transactions.
Stuart Bailey, head of prime central London sales at Knight Frank, said: “The key difference this year is that buyers are using pre-Budget speculation and bond market jitters to negotiate the price down rather than walk away from the deal completely.
“The underlying confidence among buyers is there and parts of PCL are extremely good value.”
Price falls have also improved the relative value available to buyers.
Average prices in PCL fell by 3.3% in the year to August. Values are now 23% below their level 11 years ago.
In POL, prices fell by 0.4% over the year and are 7% lower than a decade ago.
The market now faces another period of uncertainty ahead of the Budget on 28 October, particularly if borrowing costs remain elevated.
