London is expected to record the largest drop in house prices in the UK in the near term, according to property agents, as the capital is disproportionately hit by economic uncertainty and higher taxes.

The Royal Institution of Chartered Surveyors’ indicator of new buyer enquiries across the country weakened to its lowest level since November 2023. Property surveyors also reported a fall in agreed home sales in February.

The picture is even bleaker in London. The capital experienced the worst dip in property transactions and one of the largest falls in demand across all UK regions. Agents expect London home values to drop over the next three months more than anywhere else across the country.

“Sales are sluggish with low confidence caused by uncertain political and economic forecasts,” William Delaney, a property consultant at Coopers of London, said in comments accompanying the report. “The usual imperatives that motivate a decision to purchase (growing family, better school catchment area, transport facilities etc.) often don’t apply in central London. Buyers want stability and confidence.”

UK Agents Are Downbeat About London Housing Market

Adding to pressure on the London market, the rush to tie up purchases before a property tax relief expires in April appears to be fading. With homebuying taking five months on average, people who only started the process this year have little chance of completing on time.

“The UK housing market appears to be losing some momentum as the expiry of the temporary increase in stamp duty thresholds approaches,” said Simon Rubinson, chief economist at RICS. “Some concerns are also being expressed by respondents about the re-emergence of inflationary pressures and the more uncertain geopolitical environment.”

Rising cost-of-living pressures are also weighing on demand. Prospective buyers are finding it harder to save for a deposit as they face increasing food and energy bills in addition to high rent costs. Little relief is expected from the Bank of England where officials are taking a cautious approach to easing borrowing rates.

Chancellor Rachel Reeves has warned that US President Donald Trump’s tariffs could worsen the situation by pushing up inflation and depressing growth.

First-time buyers in pricey areas like London will be most affected when stamp duty thresholds become less generous. Missing the deadline will cost some more than £11,000 ($14,251) in extra charges, according to Rightmove.

The RICS figures chime with recent reports suggesting that London’s housing market is coming under pressure from tax increases, high borrowing costs and stretched affordability. Mortgage lender Halifax said house prices in the capital fell the most since 2023 in February, while official data showed London homes lost almost 3% of their value in real terms over the last year.