House prices have continued to decline in various parts of London, with tens of thousands of pounds being wiped off the average home's value. According to the latest data from the Office for National Statistics, the average house price in London stood at £551,000 for the year ending December 2025, marking a 1.0% decrease. This makes London the only region in the UK to see a drop in average house prices over the last 12 months.
Sharp Declines in Key London Boroughs
The falls have been particularly severe in certain areas of the capital. The City of Westminster recorded the most significant proportional decrease in the country, with average house prices falling by 14.8% to £880,000—equivalent to a loss of approximately £153,000 per average home.
In Kensington and Chelsea, average prices dropped by 11.5% to just under £1.2 million. Camden saw an 11.1% decline to £784,000, which translates to about £98,000 less than a year earlier. Other notable decreases include Tower Hamlets, where prices fell by 10.9% to £464,000 (a drop of around £56,000), Hammersmith and Fulham with a 9.5% decrease (roughly £75,000), and the City of London with a 7.1% reduction.
Expert Insights from a Mortgage Broker
Andrew Montlake, CEO of London-based mortgage broker Coreco, commented on the situation. "House prices have been under pressure in London for some time, as the latest data shows. For too long, prices grew too fast and now London is recalibrating. But it’s an important recalibration," he said.
Montlake highlighted the challenges for first-time buyers, noting that saving for a deposit remains a significant hurdle due to high prices, the cost of living, and increasing rents. "Those who are fortunate enough to get onto the property ladder in London usually get help from the Bank of Mum and Dad, or even Gran and Grandad, as without that it’s mission impossible," he added.
However, he pointed out some positive developments. Mortgage rates have decreased to more acceptable levels, and lenders have eased their criteria, allowing people to borrow more. "Lenders cracking the affordability conundrum has been a gamechanger for the London property market and I expect things to heat up again in 2026," Montlake stated.
Market Outlook for 2026
Montlake predicts that improved affordability will help more people enter the property market, potentially leading to increased activity. "Prices will not shoot up, as they’re so high already, but improved affordability is helping more people get on the ladder. That, in turn, oils the rest of the property market in the capital," he explained.
He advised that buyers who act earlier in the year might secure better deals, as prices could rise later in 2026. "I definitely think that those who buy earlier in the year are more likely to get a better deal than those who wait until the tail end of 2026, as prices will have risen by then. And lower mortgage rates could see the market shift from a buyers’ market to a sellers’ market," Montlake said.
Recent trends show a pickup in demand, with February seeing a return of buyer interest. "The people who are buying now seem very determined while sellers in London also seem more motivated, and are not hanging on for the silly prices they may once have received. 2026 has the potential to be a turning point for London’s property market after a subdued three or four years," he concluded.
