It is no surprise that the housing market has not had an easy year. Mortgage rates remain high as conflict in the Middle East keeps energy prices — and inflation — in focus, pushing hopes of cheaper borrowing further into the distance.
Then there is the drag of taxation, and the uncertainty over what may come next. That is weighing most heavily on prime markets, where buyers often have more discretion over when — and whether — to move. Price growth has cooled across the country, but in most places values are still edging upwards. At the top end, however, the pressure is much harder to ignore.
"While 40% of £1 million-plus homes increased in value over the past 12 months, compared with 75% a year earlier, the proportion falls to just 26% among properties valued at £2 million or more."
Prime London feels the squeeze
London provides the sharpest example of the divide between the mainstream and prime markets. In the year to June, the average property value in inner London fell by 6.8%, returning prices to their 2019 level. Prices in outer London slipped by just 0.6%, but remain 1.9% (£9,990) below their autumn 2022 peak.
Higher borrowing costs matter here, but tax is creating a much sharper divide at the top of the market nationwide. While 40% of £1 million-plus homes increased in value over the past 12 months, compared with 75% a year earlier, the proportion falls to just 26% among properties valued at £2 million or more.
The High Value Council Tax Surcharge, often referred to as the Mansion Tax, is likely to be a key reason for that gap. From April 2028, it will apply to properties worth £2 million or more, giving both buyers and sellers another cost to factor in. Speculation that the threshold could be lowered to £1.5 million in the October Budget has only deepened the uncertainty, particularly for homes close to the cut-off. But it is not acting alone - stretched affordability, the wider tax burden and fewer international buyers have been weighing on the prime market for several years.
In England and Wales, homes of £1 million or less are selling for 95.2% of their asking prices, down from 95.7% in 2025. Homes of between £1 million and £2 million are achieving 93.5%, against 94.5% a year ago.
For properties worth £2 million or more, the average sale price has slipped to 92.5% of the asking price, the lowest level since 2015. With the surcharge looming, buyers have more reason to negotiate and sellers are having to work harder to secure a deal.
London villages still have pulling power
Yet within London, its village-like neighbourhoods have proved more resilient. These are perennially sought-after places where owners often trade up or down locally rather than leave the area altogether, helping to sustain a deeper pool of demand. Herne Hill, London SE24, leads the league table with a 55% jump in the number of would-be buyers registering with branches to buy. Kingston and Surbiton, followed by Richmond, recorded rises of 47% and 39% respectively.
These locations share more than strong identities, attractive high streets and more space for your money. They also offer the schools, green spaces and sense of community that encourage buyers to put down roots. In a more cautious market, that long-term appeal matters - lower prices are persuading some households that this is their moment to move into an area they might previously have struggled to afford.
Hammersmith and Fulham tells a similar story. Interest from prospective buyers has risen by 33.2%, despite a double-digit fall in prices across the borough. For buyers who still want the amenities and connections of west London, that adjustment has begun to create opportunity.
Bidding wars have not gone away
Away from the very top end, the picture becomes considerably more resilient. Across Great Britain, 29% of homes sold this year received three or more offers. Waltham Forest tops the league table, with 56.5% of sales attracting at least three bids, while Three Rivers in Hertfordshire follows close behind at 54.5%.
The wider supply-and-demand figures reinforce that picture. In the first half of 2026, there were 9.5 buyers for every new home coming onto the market in Great Britain, down from 10.1 in 2025. London remains one of the country's most competitive regions, with 11.6 buyers per property — only slightly below the 12.0 recorded in 2025 and still above its pre-pandemic average of 10.5.
Across the wider southern markets, competition is softer. The South West recorded 9.8 buyers for every new home, while the South East had 7.7 — down from 8.3 last year and below its 2015-19 average of 9.3.
Buyers have become more selective rather than disappearing altogether. Competition is clustering around well-priced homes and areas where affordability, local amenities and transport links continue to give people a reason to move — which is why bidding wars can still break out even in a cooler market.
