Almost £20,000 wiped off London properties, official data show
Values have fallen in eight of the past 12 months
London's housing market experienced its steepest annual price drop in two and a half years, with nearly £20,000 erased from the average property value, according to official data released on Wednesday, September 16. The Office for National Statistics (ONS) reported a 3.3% decline in average prices over the past year, marking the sharpest fall since January 2024. Values fell in eight of the last 12 months, with a 0.5% decrease specifically in July.
London and the south west of England were the only regions to record year-on-year price reductions, while the rest of the country saw an average increase of 1.4% to £273,000. Despite remaining the most expensive part of the country, London's average house price has plummeted £19,000 since its peak in mid-2025, which stood at £550,000.
The housing market has been severely impacted by rising mortgage rates, disproportionately affecting buyers due to the larger loan amounts in London. Traders have increased predictions of Bank of England interest rate hikes four times over the next year. Mortgage rates have surged, with the average two-year rate reaching 5.77%, the highest since May 2023. The five-year rate has also hit 5.83%, levels last seen in November 2023.
Several factors contribute to the decline in London property prices, including a crackdown on landlords, increased taxes, and the upcoming surcharge on properties worth over £2 million starting in 2028. The most expensive areas, such as Westminster and Kensington & Chelsea, saw the most significant price drops, with Westminster properties falling 21% and Kensington & Chelsea homes losing 14% of their value.
Robert Wood, chief UK economist at Pantheon Macroeconomics, cautioned that national house price growth is expected to slow further in the coming months. He anticipates that the typical 2-year fixed-rate 75% LTV mortgage rate will rise to around 5% by year-end. Higher energy prices will further dampen housing demand. ONS data shows that private rents increased 3.8% in the year to August, with London's rents rising slightly slower at 3.5%.
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