Property slump hits half of London as prime boroughs lead the decline
London has a “two-speed” market, as house prices are falling in about half of London’s boroughs, with the most expensive boroughs hit the hardest.
The average house price in London for October was £547,000, down 2.4 per cent from the previous year, according to the Office for National Statistics (ONS).
The data also showed that property prices contracted year-on-year in 18 of the 33 boroughs of the capital, in contrast to a 1.7 per cent house price increase across the UK.
Many of the capital’s most expensive boroughs registered a contraction, including an 18 per cent fall in Canada, a 16.5 per cent contraction in Kensington and Chelsea, and similar declines in the City of Westminster.
While boroughs such as Barking and Dagenham, Bromley, and Lewisham saw house prices continue to expand at a solid pace, in Havering, home to Romford, prices rose 5.3 per cent.
Speaking to the Financial Times, Tom Bill, head of UK residential research at estate agency Knight Frank, said London was a “two-speed market”, with the prime areas hit by taxes, with stamp duty being higher for more expensive properties, and “more susceptible and sensitive to political risk”.
In more affordable areas of London, demand tends to be strongest, as in the boroughs of Havering, Waltham Forest, and Lewisham, where the average house price reached an all-time high this Autumn.
While in the most expensive London borough, Kensington and Chelsea, the average price dropped to £1.19m, the lowest in more than a decade, down from a peak of £1.6m.
London house prices hit by Autumn Budget
In the Autumn Budget Chancellor Rachel Reeves announced a mansion tax surcharge on houses above £2m in value, while the Chancellor stopped short of more dramatic reforms to the council tax system.
The Chancellor greenlit plans to apply a “high-value council tax surcharge” on all properties valued at over £2m, starting at £2,500 for homes between £2m and 2.5m, up to £7,500 for homes worth £5m or more.
The policy will raise an estimated £400m in 2029-30 with the revenues flowing to the central government rather than local authorities.
Speaking back in April, director of Benham and Reeves, Marc von Grundherr, said: “The prime London market is a very different beast compared to the rest of London, let alone the UK, and it’s clear that the new Labour government has had a significant impact on prime London property values.”
However, prices in prime areas of London have stopped growing since the mid-2010s as they became increasingly expensive, while mortgage regulation changed, increasing costs.
Richard Donnell, executive director at property portal Zoopla, told the FT that “everyone wanted to be in London, investing in London” when prices surged just after the financial crisis.
But after the post-financial crisis boom and since the Brexit vote, London house prices have “gone nowhere”, said Donnell. “The Brexit vote just had a boom-bust sea change moment for London as a place to do business, as a global city.”
Bill also told the FT that since Brexit, on the international stage, “London’s perhaps lost some of its appeal.”
Going into the new year, London house prices are set to barely budge in 2026, as research from Rightmove has shown that London house prices will rise by just over one cent next year, versus a two to three per cent increase in prices on average in the UK.