London's quality-adjusted price level is softening into 2026. Through February, the Baseline Market factor — the intercept of our rolling cross-sectional regression on HM Land Registry transactions joined to MHCLG EPC records — sits 2.0% below its February 2025 reading, even after a +1.9% bounce over the three months from November 2025 to February 2026. The pure-factor story underneath is dominated by one mover: Floor Area, which has shed 5.6% in the last quarter alone.
| Factor | 3-month return | 12-month return | Interpretation |
|---|---|---|---|
| Baseline Market | +1.9% | -2.0% | Quality-adjusted market level — rebounded into Q1 but still down year-on-year. |
| Floor Area | -5.6% | -3.4% | Per-sqm premium for larger units compressed sharply — buyers paying less up for size. |
| House vs Flat | +1.9% | +1.2% | House-over-flat premium widened — the structural type spread is back. |
| Room Density | -0.7% | +1.0% | Layout density premium softened in Q1 after a positive 12 months. |
| Price Tier | +0.3% | +0.2% | Prime-vs-mainstream tier spread essentially flat. |
| Freehold | -0.0% | +0.1% | Tenure premium unchanged — leasehold reform headlines not visible in the model. |
The Floor Area factor has fallen 5.6% over the last three months and 3.4% over twelve. In hedonic terms, a marginal square metre is being priced lower today than a year ago — consistent with buyers stretching less for footprint as borrowing costs filter through. Cumulatively since 1995 the factor stands at -4.4%, so what looked like a long-term mean reversion has accelerated into 2026.
The House vs Flat factor added 1.9% in the three months to February and 1.2% over the year. The cumulative return on the type premium is modest (+0.5% since 1995), but the recent direction is unambiguous: houses are repricing upward relative to flats at the current basket, the opposite of the post-pandemic "back to the centre" trade we tracked in 2022–23.
Price Tier (+0.2% YoY), Location Premium (-0.1% YoY) and Freehold (+0.1% YoY) are all inside ±0.2%. The cross-sectional spreads between prime and mainstream postcodes, and between freehold and leasehold, were essentially unchanged across the 12 months ending February 2026. The polarisation trade that defined 2023 has stalled.
Floor Area dominates the visible amplitude — the cumulative drag is what's pulling the headline quality-adjusted index lower. The House vs Flat line traces the post-pandemic round trip: a sharp run-up through 2023, a partial give-back in 2024, and a renewed climb through late 2025.
Interactive charts for every factor, updated monthly.
Open London Factors →Methodology: rolling 3-month cross-sectional OLS of log(price/sqm) on property characteristics, HM Land Registry transactions joined to MHCLG EPC records, 1995–present. Full notes at about.