Inner London house prices fall at fastest rate since global financial crisis
Sharp annual decline in most expensive boroughs underscores impact of Budget uncertainty
House prices in inner London fell at the fastest pace since the global financial crisis in November, highlighting the impact of speculation about a shake-up of property taxes in the November Budget and affordability pressures in the city.
The 4.6 per cent annual drop in prices in the heart of the capital followed a 4.3 per cent contraction in October and marked the biggest decline since the financial crash, when they fell at double-digit rates as the economy shrank.
The largest falls were recorded in the most expensive boroughs, according to data published by the Office for National Statistics on Wednesday, though prices in London remain by far the highest of any UK region.
Average prices in Westminster dropped by an annual rate of 15.5 per cent to £866,000, while prices in Kensington and Chelsea plunged 16.3 per cent to an average of £1.19mn.
Both areas have historically been popular with overseas buyers, with some advisers reporting departures and dwindling numbers on the back of changes to “non-dom” tax rules.
By contrast, prices in outer London — which includes boroughs such as Bromley, Waltham Forest and Havering — continued to rise. Havering and Bromley registered annual increases of 5.2 per cent and 6 per cent respectively.
The rises in outer London resulted in an overall fall in average house prices of 1.2 per cent in the city in the year to November, taking them to about £553,000. This compared with a 2.6 per cent decline in the year to October.
Richard Donnell, executive director at property portal Zoopla, said speculation about higher taxes on expensive homes in the run-up to chancellor Rachel Reeves’ November Budget had “hit demand and market activity at the upper end of the housing market”.
In the fiscal event Reeves announced a council tax surcharge from April 2028 on properties worth more than £2mn, most of which are in London and the South East.
Although they were not announced, wider changes to the tax regime — including a redesign of the stamp duty system and the introduction of capital gains tax on some primary residences — had been the subject of speculation for months as Reeves sought to fill a hole in the public finances.
Ollie Marshall, director of buying agency Prime Purchase, said some of the rumoured measures “may not have come to pass but led to a market hiatus for most of the year”.
The ONS data on Wednesday showed average UK house prices rose at an annual rate of 2.5 per cent to £271,000 in November, up from 1.9 per cent in October and the first acceleration since June.
Ian Boreham, ONS head of housing market indices, said the North East was the English region with the highest growth in prices, at 6.8 per cent in the year to November, while “London was the only region showing an annual fall”.
Tom Bill, head of UK residential research at real estate group Knight Frank, said affordability was “still shaping the map of UK house price growth, which means more expensive areas like inner London are seeing prices retreat”.
A rise in asking prices in January indicated that the Budget could “have been worse”, he said, but the economy remained weak despite a drop in mortgage rates on the back of Bank of England interest rate cuts.
The ONS data also showed that annual growth in private rents declined from 4.4 per cent in November to 4 per cent in December, the lowest since spring 2022 and well below a peak of 9.1 per cent in 2024.
Last month’s figure was also well below the 4.7 per cent annual rise in total wages in the three months to November, helping tenants’ finances after a prolonged squeeze.
Zoopla’s Donnell said rental inflation was slowing across the country as “improved affordability for first-time buyers and a large drop in international migration means weaker rental demand”.