London house prices fall for sixth consecutive month

London house prices have fallen for a sixth consecutive month, marking the sharpest annual decline in nearly two years and signalling a sustained slowdown in the capital’s property market, official data shows.

The average London house price dropped by 1.7% in the year to January to £556,000, according to figures from the Office for National Statistics and the Land Registry. In contrast, UK house prices rose by 1.3% over the same period to £268,000, highlighting a widening divergence between the capital and the rest of the country.

London’s housing market has now been contracting on an annual basis since August 2025, while prices across the UK have continued to grow modestly. The latest fall is also the steepest recorded in the capital since February 2024.

Analysts say affordability pressures and shifting buyer behaviour are weighing heavily on demand. Tom Bill, head of UK residential research at Knight Frank, said London was “the victim of its own success,” with many buyers now seeking better value outside the capital and increasingly opting for homes beyond the M25. He added that post-pandemic lifestyle changes have also supported stronger regional markets.

The downturn has been most pronounced in flats, which fell 4.2% year-on-year, while inner London saw a 4.1% decline. Prime central boroughs such as Westminster and Kensington and Chelsea continued to register double-digit price drops.

Industry experts also point to supply-side pressures, including landlords and second-home owners exiting the market amid tax and regulatory changes.

The broader economic backdrop is also weakening, with London’s unemployment rate rising to 7.6% in late 2025 — the highest of any UK region — while rental growth in the capital has slowed to 1.7%, well below the national average.

Economists warn that higher mortgage rates are likely to add further strain, with average two-year fixed deals rising to 5.56%, up sharply in recent weeks amid global inflation concerns. Analysts expect the impact of tighter borrowing conditions to become more visible in the months ahead.