Post-Budget Clarity Spurs Activity in Prime London Markets

Twelve months ago, financial markets were feeling a sense of nervous uncertainty ahead of Donald Trump’s presidency.

Their concerns centred on the possible inflationary impact of US tariffs, which meant stock markets fell before his inauguration on 20 January and traders bet that UK Bank Rate would exceed 4.25% by the end of 2026. 

Given the situation in Venezuela, it’s fair to say the first week of 2026 has brought more clarity around Trump’s plans. But while the South American operation has raised questions, it has done little to unsettle markets so far.

Equities have climbed on both sides of the Atlantic and the FTSE100 broke through 10,000 for the first time this month. That particular milestone had more to do with the outlook for commodity prices and defence spending than optimism surrounding the UK economy.

Meanwhile, as inflation expectations have receded, financial markets currently price Bank Rate closer to 3.25% by this December, which is a notably more optimistic view than a year ago. 

“The situation in Venezuela is clearly volatile but given that it doesn’t appear to be about regime change, it is more of a news story than a financial markets story,” said Michael Brown, an analyst at financial broker Pepperstone. “There has also been a muted reaction on markets to what has been happening in Iran.” 

Tentative Resilience

Property markets have also demonstrated tentative resilience in recent weeks.

While the number of UK exchanges last year was 5% lower than in 2024, activity picked up in the final quarter. The number of sales in the last three months of 2025 was identical to the same period in 2024, Knight Frank data shows.

One reason for the late bounce is that buyers and sellers acted before the November Budget due to the speculation over property taxes. Others acted after the event, relieved that mansion tax rates were not set higher.

The Q4 surge was more noticeable in prime markets, where the speculation had been most intense. The number of exchanges above £5 million in London during the last three months of the year was 29% higher than in 2024.

‘With the Budget and Christmas behind us, there is better visibility for buyers and sellers,” said Stuart Bailey, head of prime central London sales at Knight Frank. “There’s been no sudden turn in the market, but an absence of bad news means things feel like they did in spring 2025.”

Will the momentum continue?

“Buyers thinking medium to long term can certainly see this is a good time to act. How strong the market becomes also depends on sellers, some of whom perceive the market to be worse than it actually is and are holding back,” said Stuart.

Two-Speed Market

Last year’s prolonged bout of pre-Budget speculation, which began in the summer, meant prices continued to slide. Average prices in prime central London fell 5% in the 12 months to December, which was the biggest annual fall recorded since the market was closed during the pandemic in July 2020.

It means prices are down by 22% since the last peak in mid-2015, which is driving demand from buyers sensing value, as noted by Stuart.

Prices have been steadier in the more needs-driven and domestic market of prime outer London. After being flat in the final quarter of 2025, prices ended the year 0.2% down, demonstrating how the Budget created a two-speed market in the capital.  

How markets perform this year will again depend on what the Chancellor does next. Rachel Reeves is clearly keen for the spring statement on 3 March to be a non-event, which is good news for anyone concerned about another bout of tax speculation.

Her financial headroom is still tight by historical standards so similar speculation later in the year feels plausible.

However, she and Kier Starmer may have to see off internal threats to their position before then, as discussed on the latest episode of Housing Unpacked with former Treasury special advisor James Nation.

It means, for now, the key question for the property market is not the content of the autumn Budget, but who will be delivering it.