London Housing Market Plunges as Rest of UK Sees Slow Growth
Property values decline in two-thirds of London's postcodes, with affluent areas hit hardest, while other UK regions experience modest gains.
House prices in London have experienced a significant downturn, with values falling in two-thirds of the capital's postcodes over the past year, according to new data from estate agent Purplebricks. This contrasts with a general trend of slow growth across the rest of Britain.
The latest House Price Index (HPI) revealed that 23 London boroughs saw property values drop in the 12 months leading up to August, while only ten recorded an increase. Nationally, the average cost of a home in the UK rose by a modest 0.9% annually, with a 0.3% increase from July to August.
Affluent areas of London were particularly affected. The Royal Borough of Kensington and Chelsea saw the largest average price drop, with a decline of £192,084 over the year. Homes in the City of Westminster and the City of London also experienced significant falls, decreasing by £148,015 and £124,071 respectively.
Properties valued at over £2 million have seen an average decrease of £284,000. Experts attribute this decline, especially in high-value homes in the capital, to concerns surrounding Labour's proposed 'mansion tax.' Under these plans, houses worth £2 million or more could face an additional annual tax bill of £2,500 to £7,500 starting in April 2028. Demand for these properties has reportedly softened since the levy was first announced.
In contrast to London's decline, the North East of England recorded the highest annual price growth at 3.2%, adding £5,105 to the average property value, which now stands at £165,640. The North West of England saw a 2.2% increase, with most homes valued around £220,393. The Manchester borough of Trafford was a notable performer, with prices rising by £23,682 to £393,897.
Wales and Scotland also reported strong house price growth, with increases of 3.1% and 2.9% respectively. The average Welsh property is now valued at £216,363, while most Scottish homes are worth approximately £198,397.
Despite the overall slowdown, some areas within London and its commuter belt have shown resilience. Kingston upon Thames recorded the strongest price growth in London, adding £27,645 to average home values, now at £597,587. In the commuter belt, St Albans in Hertfordshire saw prices rise by £20,539 to £655,974, and the Surrey district of Epsom and Ewell experienced a £17,810 increase to £566,163.
Experts point to several factors contributing to the subdued market. Mortgage approvals are at their lowest since the start of 2024, buyer inquiries are weak, and mortgage rates have climbed to around 6%. Affordability remains a significant barrier for potential buyers.
Estate agents anticipate that house prices may continue to fall in the coming months due to fewer buyers and sales agreements. The Royal Institution of Chartered Surveyors' latest survey indicates a bleak outlook, with members reporting fewer transactions on the ground. Lloyds Bank reported earlier that average property values have remained stagnant year-on-year.
Analysts suggest that higher borrowing costs are increasing downward pressure on prices and transaction volumes. Concerns about potential property tax hikes ahead of the upcoming budget could further impact the market. Tom Bill, head of UK residential research at Knight Frank, noted that "higher borrowing costs will increase downward pressure on prices and transaction volumes in the final months of the year."