Q2 -2025 | Market Update

The first six months of 2025 can best be described as a challenging start. However, according to LonRes, signs of recovery are beginning to emerge. In our view, there remains considerable scope to secure deals that strike a balance and bring both buyers and sellers to the table.

Sales

Sales in Q2 2025 were down approximately 24.2 percent year-on-year and around 4.3 percent below the pre-pandemic average. Despite a strong March, weaker activity in Q2 left overall sales for the first half of 2025 about 5 percent lower compared to the same period in 2024. Meanwhile, properties “under offer” fell 10.2 percent in Q2, but rebounded in June. The tension between buyers and sellers expectations persists. Buyers often perceive a buyers’ market, possibly fueled by political uncertainty, but hopes for steep discounts are not always realistic. A property market like London may correct, but it is far from being “on fire sale”.

Rentals

London’s rental market is showing activity earlier than usual. According to LonRes, July is now seen as the new September, with tenants beginning their search earlier. High-end rentals are expanding: properties asking £5,000 per week now represent 6.3 percent of the market, compared with 4.2 percent in 2019. Landlords are advised to remain realistic: vacant units cost money, and aggressive rent hikes risk leaving flats empty for too long.

Regulatory Changes and Adjustments

According to Rightmove, only 43 percent of landlords are aware of the upcoming Renters’ Rights Bill, while one in three is considering exiting buy-to-let. Despite this, the rental market continues to show strength. Since 2020, advertised rents have grown almost uninterruptedly, with the average monthly rent for new tenants rising by more than £400 in five years. At the same time, during H1 2025, 24 percent of rental listings saw price reductions, the highest proportion in over a decade. This shows how landlords are adjusting to cautious tenant expectations and new economic conditions.

Renting vs Buying

Is renting cheaper than buying? Without significant liquidity, renting in London is generally more affordable and flexible, while buying suits those with a long-term view or substantial equity. Despite the Bank of England’s interest rate cut to 4% on 7th August, renting remains a viable short-term solution for those without significant liquidity, especially in the top-end market where economic valuations carry substantial weight.

Sales Supply and Price Cuts

The first half of 2025 recorded 14.2 percent more properties listed for sale compared with H1 2024. At the same time, unsold properties saw more frequent price cuts, with every month this year posting at least 20 percent more reductions compared with the same month last year.

London & Italy

Rental yields in Prime Central London average around 4.88 percent, sometimes approaching 6 percent, higher than Milan and Rome at 3-4 percent. Italian city centres, however, show steady rental growth of 3-6 percent annually. In the ultra-prime segment, London faces fiscal headwinds and cautious international buyers, while Italy experiences fewer but stable deals, often driven by foreign investors targeting vineyards, historic villas, or iconic locations. Institutional and local investors are also increasingly focused on hotels in convenient locations, where due diligence confirms gross yields around 5-6 percent.

Uncertain Times

In times of political and economic uncertainty, such as London’s current lead-up to the Autumn Budget, the prime market balances caution with opportunity. Corrections should not be mistaken for distress sales: in mature markets, they often represent unique entry points for strategic investors. Uncertainty itself can act as a catalyst for long-term opportunity.

London today is in a cyclical repositioning phase, offering medium-to-long-term recovery opportunities, while the Italian market offers stability and capital protection through scarce high-end stock and steady demand. For international investors, the two markets can play complementary roles: London as the growth bet, Italy as the stabiliser in times of global volatility.

Last but not least, thanks to the tax benefits introduced by the Italian Government this wonderful country is now certainly more attractive for those seeking  a tax haven, with higher living standards.