London house prices sink again as wealthiest areas hit
House prices in London have fallen for the seventh consecutive month, as the capital’s luxury hot spots saw huge slumps in value.
House prices dropped more than 12 per cent in Westminster – which includes in-demand areas like Mayfair and Knightsbridge – and 11 per cent in Kensington and Chelsea.
The average house price in the capital tumbled 3.3 per cent to £542,000 in the year to February, compared to a year-on-year drop of 1.9 per cent in the previous month, according to the Office of National Statistics (ONS).
Overall UK house prices jumped again by 0.9 per cent to £290,000, as the national picture continues to recover while the capital languishes behind.
London luxury property market slumps
Prices at the prime end of the London property market appear especially hard hit, with in-demand areas like Westminster, Kensington, Camden and Hammersmith seeing huge drops in values.
More than half (53 per cent) of high net worth individuals are concerned about the future of their primary residence, according to the latest Saltus Wealth Index.
Last week, Morning Wire revealed that London’s luxury housing market has suffered the biggest drop in a decade, as sales of prime properties fell by the biggest margin – 37 per cent year on year.
The average value of transactions last year stagnated and remained well below inflation, as some luxury properties sold for far less than their real market value.
Iran war inflation fears spook buyers
London is joined by the South East and the South West in seeing house price drops in the year to February, of 0.9 and 0.6 per cent.
Yorkshire and the Humber saw the biggest rise in house prices, up 3.9 per cent.
While house prices are growing on average, these gains are slow compared to historical levels, as fears that the Iran war will spike inflation dampen buyer demand.
Inflation jumped to 3.3 per cent in March, in what could be the start of a long climb in inflation due to the global fuel price surge caused by the conflict in the Middle East.
Though the Bank of England had at the start of the year been expected to cut interest rates, the market is now bracing for the potential of multiple interest rate hikes this year.
London tax regime hits housing market
Stacy Eden, an analyst at audit firm RSM, said: “With UK economic growth expected to be under 1 per cent for 2026, and slowing wage growth being eaten away by inflation, it is unsurprising that buyer demand is waning, and concerns over the interest rate outlook are rising.”
Eden said London’s house prices are falling because the capital is particularly exposed to stamp duty, due to the typically high house prices in the city.
London’s house market is also more exposed to tax and regulation policy – like the end to the non-dom regime – which might be deferring overseas residents or property investors, Eden said.
Barret Kupelian, chief economist at consultancy PwC, said: “The question now is not whether the market softens, but by how much.
The UK’s housing market is “no longer moving as one country, but as two,” because of the stark difference between house prices in the south and the rest of the country, Kupelian said.
“The Autumn Budget uncertainty of last year may be behind us, but events in the Middle East have replaced it with a fresh fog.”