London buyers sense an opportunity as house prices in the UK fall sharply

A recent news item has sparked interest amongst house hunters looking for property in the capital. The building society Nationwide has reported that Britain’s house prices fell by 0.08 per cent last month. So how will this affect property prices in London?

If you are looking for a new home or property investment you may be tempted to explore prices in different areas in order to make comparisons.

Why the London property market is different

Across the country house prices will typically vary between north and south, or from county to county. However, you’ll find that London’s property market marches to a very different drumbeat. Property valuation here is fine-tuned to a precise degree: prices for similar properties can vary within a single street, or even within the same apartment block.  

The property market in London is a unique patchwork of micro areas, where prices are driven by local demand and emerging lifestyle trends. This complex marketplace may appear to have little in common with UK pricing patterns, but it isn’t immune to the economic stresses felt by the rest of Britain.  

That’s why the recent fall in prices is important to London buyers. It was the biggest drop in two years, causing the UK’s annual growth rate to fall to 2.1 per cent. The property portal Rightmove also noted a monthly drop in average prices of 0.3 per cent in June.

Why have house prices in the UK fallen? 

In 2022, during Liz Truss’s brief and troubled period in office, Chancellor Kwasi Kwarteng introduced a permanent reduction in Stamp Duty rates. However, this was part of a package of economic policy announcements that caused chaos in the financial markets. In a bid to calm the markets following Liz Truss’s resignation, Chancellor Jeremy Hunt changed the permanent Stamp Duty cut to a temporary ‘holiday’, with an end date of 31st March 2025. 

Last year the looming deadline encouraged many buyers to accelerate their home moving plans so they could benefit from the lower Stamp Duty rate. This increased market activity and created a minor property boom in the autumn and winter of 2024. 

Nationwide’s chief economist Robert Gardner believes that this rush to meet the deadline has led to the softer price growth and weakened demand we are seeing now. UK house prices were hit by the largest decline in two years as the market adjusted to this development. 

How have London house prices changed?  

London is an attractive location for aspiring home movers but historically it has been hard for buyers – especially first-time property buyers – to enter the market. Limited housing supply, the cost of property relative to wages and higher interest rates have created barriers for all but the wealthiest house hunters.  

Despite these disadvantages, on average London property prices are rising. According to the Land Registry and the Office for National Statistics, London house prices enjoyed a boost in the year to April 2025, rising to an unexpected high of 3.3 per cent. The average asking price for a central London property is now £1,263,769 (Rightmove).  

However, certain boroughs have experienced significant annual decreases, and this has made some of the capital’s most sought after areas more affordable. The City of London recorded a drop of 14.3 per cent over the year, while Westminster saw prices go down by 15.3 per cent. Boroughs where house prices have risen include Southwark, with a 5.6 per cent rise over the last year, and Lambeth, which saw an increase of 1.3 per cent. 

 What will the summer housing market offer buyers and investors? 

Despite continued uncertainty regarding the global economy, there is a high degree of optimism that property market activity and sales will pick up as the summer progresses.  

This is because underlying conditions in the UK economy remain positive. Unemployment remains low, earnings are rising at a healthy pace - after accounting for inflation - and borrowing costs could go down further (this is if, as expected, the Bank of England lowers interest rates later this year). 

Financial markets are already offering better mortgage deals in the hope of a quarter-point interest rate reduction in August and a further cut at the end of the year. At the time of writing the rate for a two-year, fixed rate mortgage has dropped to 4.57 per cent and some lenders are offering rates as low as 3.84 per cent. 

Is it a good time to buy in London? 

Conditions indicate that we are still in a buyer’s market, where sellers are more open to negotiation. Buyers who act now will also benefit from the softer prices that resulted from recent UK stamp duty changes.  

As a long-established, family-run business with deep knowledge of the London property market, we would be more than happy to help with yourq next move. Why not contact our offices in Westminster, London Bridge or Kennington to share your plans?