Political Flux to Keep Lid on Prime London Prices

Keir Starmer’s exit from office appears imminent following last week’s local election results. Only the process and the timetable are unclear.

That said, the country should have a new Prime Minister and Chancellor by the time of the Labour Party conference in late September.

Given how political parties retreat into their comfort zone during moments of jeopardy, Labour is also expected to move to the political left. Keir Starmer himself focussed on the public ownership of British Steel and closer ties with the European Union in a speech on Monday.

For the property market, the battle that is shaping up between a soft-left Labour government and the bond market will be important to watch.

Any credibility gap around the government’s tax and spend plans will put upwards pressure on mortgage rates.

If Andy Burnham is to run for leader, his previous comment about “not being in hock to the bond market” will need finessing.

We recently revised down our house price forecasts for this year as a result of the Middle East conflict. One reason was the upwards pressure on mortgage rates caused by the energy price shock since hostilities started at the end of February. We are also cautious about another ‘smorgasbord’ of smaller tax hikes in the autumn Budget as the government attempts to rebuild its financial headroom.

Lid on Activity

Geopolitical volatility, rising borrowing costs and the adverse tax landscape all kept a lid on activity in the prime London residential market in April.

Sentiment had been improving in the first two months of 2026 after an uncertain period before November’s Budget.

However, the number of offers made in London last month was 9% below the five-year average and the number of transactions was 12% down.

Average prices in prime central London (PCL) fell 3.8% in the year to April, which was a marginal improvement on the revised figure of -4% recorded in March. High rates of stamp duty and the lack of a viable replacement for the non dom regime have dragged on demand. It means prices in PCL are 22% below their last peak in mid-2015.

Meanwhile, in the more domestic and needs-driven market of prime outer London, prices fell 0.4% over the year.

Faced with the prospect of intensifying political uncertainty, it’s hard to see how upwards price pressure returns in the short term.

For example, any tax speculation ahead of the autumn Budget looks likely to be compounded by not knowing the identity of the Chancellor.