London’s reputation as a dependable engine of property wealth is being quietly dismantled. New data shows a growing share of homes are now selling for less than their purchase price, prompting fresh warnings for landlords and investors who have long relied on capital growth to offset rising taxes, regulation and mortgage costs.
London house prices and capital growth risk
New analysis by estate agent Hamptons shows that almost 15% of London homeowners sold at a loss in 2025 – a figure that would have been considered highly unusual just a few years ago.
Loss-making sales are even more concentrated in prime areas. In parts of the City of London, Kensington and Chelsea, and Westminster, more than one in five sellers failed to recoup what they originally paid. For investors who entered the market late in the last cycle, that raises uncomfortable questions about exit strategies and long-term returns.
The findings echo broader concerns about London’s muted price performance since 2020, particularly once inflation, stamp duty surcharges and refurbishment costs are factored in.
Buy-to-let investment under pressure in the capital
The research aligns with warnings from wealth manager Rathbones, which says London property can no longer be treated as a low-risk cornerstone of financial planning.
Simon Bashorun, Head of Advice in Rathbones’ Private Office, said assumptions around ever-rising values now look dated. “London property is no longer the low risk cornerstone of wealth planning that many high net worth families assume it to be,” he said. “Those with property as part of their portfolio need to give its future consideration.”
He pointed to three structural weaknesses for property-heavy investors: concentration risk, illiquidity, and a rising policy and tax burden. For landlords, that policy burden is already familiar territory – from higher stamp duty surcharges to tighter regulation and shrinking reliefs.
While property still has a role, Bashorun cautioned against relying on prime London homes or buy-to-let portfolios as the backbone of retirement or estate planning.
Tax, liquidity and the landlord outlook
Rathbones also highlighted how tax changes are compounding the issue. Higher stamp duty on additional properties, the introduction of a Mansion Tax, and renewed debate around council tax supplements for high-value homes are all eroding net returns.
Crucially for landlords, residential property lacks many of the tax-efficient reliefs available to other assets. Business Relief does not apply, meaning property values fall fully within inheritance tax calculations.
With inheritance tax thresholds frozen, more estates are being dragged into scope. Rathbones warned this increases the risk of forced or “distressed” sales, where properties may have to be sold quickly to meet liabilities – often at prices well below expectations.
Add in slow transaction times, uncertain valuations and softer rental yields in parts of London, and the traditional safety net of capital growth looks far thinner than it once did.
Editor’s view
For years, London property carried an unspoken assumption: time would fix everything. That assumption is now being tested. For landlords, the lesson is not to abandon property, but to reassess where and why they invest. If capital growth is no longer guaranteed, income, affordability and tax planning matter more than ever. The real risk may lie in standing still.
Author: Editorial team – UK landlord & buy-to-let news, policy, and finance.
Published: 13 January 2026
Sources: Hamptons sales analysis; Rathbones commentary and research
Related reading: Prime London sellers hold back as £2m listings fall across the capital
