Property prices in London have slumped for the ninth month in a row according to new data from the Office for National Statistics.
House prices have underperformed across the capital, falling by 2.1% annually, with central London and the inner boroughs particularly affected.
Westminster saw prices fall by nearly 20% to an average property valuation of £815,000.
Tower Hamlets saw the second biggest drop at 12.6%, followed by Kensington and Chelsea, where house prices fell to £1,273,000 – a decrease of 8.4%.
Hammersmith and Fulham, and Islington, also saw declines of 7.6% and 5.4% respectively.
Some outer boroughs were able to escape the fate experienced by every inner-city borough, enjoying small annual rises in property prices.
House prices in Waltham Forest increased by 3.4% to £524,000, in Redbridge by 2.7% to £503,000, and Bexley by 2.5% to £408,000.
Tom Bill, head of residential research at Knight Frank, blamed the government’s smorgasbord approach to property taxation for driving the differences between the boroughs.
“If the government is taxing, doing things like bringing in high value council tax bands, if it is targeting tax rises on wealth and property, if it is unable to cut spending, if there are questions over what it does next, this will naturally hit the slightly more higher value postcodes that we see in prime parts of London,” he said.
He added: “Outer areas are typically more needs-driven, domestic-driven markets, so you find people moving back for schools and for jobs.”
Affordability is another crucial factor.
Bill said: “If you look at the house price map of the country, the stronger house price growth is in the more affordable locations.
“Even within London, the stronger house price growth is in the more affordable parts.”
The average property price in the capital was £553,000 in April 2026 compared to a UK average of £270,000.
Since 2016, London property prices have risen by 11.9%.
Other regions across England experienced bigger rises, with the average house price soaring by 57.7% in the North West, from £137,000 to £216,000, by 54.9% in the West Midlands and by 49.6% in Yorkshire and the Humber.
Property price inflation also occurred in each of England’s biggest cities while London’s fell.
Birmingham, Manchester, Liverpool and Leeds all saw increases between 0.7% and 3.6% in their average annual house prices to April 2026.
Bill said: “London came out of the global financial crisis much more strongly and so London house prices outperformed the rest of the country. But around 10 years ago, it kind of switched. There came this affordability ceiling.
“House price growth can only be sustainable for a certain period of time before that gap will start to narrow. What happens is the rest of the country will play a game of catch up with London.”
With people feeling priced out of the capital, and value shifting around the country as companies have sought to set up in cities like Manchester and Birmingham, people have increasingly moved beyond the M25.
But as prices continue to drop across the capital, and the gap between regions and other cities narrows, demand for houses in London might bounce back.
Richard Donnell, executive director of research at Zoopla, said: “Housing affordability in London is resetting slowly as incomes rise and house prices are flat to falling.
“Affordability today is much better than it was in 2016, but we need to see it improve more over the next year or two before we see a return to positive house price inflation.
“The ratio between house prices and average incomes needs to get back to a level where more people are kind of able to participate in the housing market.”
Political certainty, and even a rethinking of stamp duty, is also required if house prices in the city are to settle.
According to Donnell, 80% of first-time buyers looking to purchase a home through Zoopla in London would pay stamp duty at an average level of 3% of the value of the property.
These higher rates, which used to be directed towards millionaires and billionaires, now hit regular home buyers the hardest.
“Everyone would love to see stamp duty got rid of, and think tanks are proposing a different type of tax on property that replaces council tax and stamp duty in one go,” Donnell said.
“But that would cost the government money, and it would take time.”
With a new chancellor expected to be selected should Andy Burnham become prime minister, the kind of certainty and political atmosphere needed to alleviate London’s deflating house prices might remain absent for some time yet.
Featured image credit: Martin Sepion via Unsplash
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