Price of an internal London residence drops £37k in a 12 months – however northern property continues to rise

Property prices in London have fallen further into the red, according to the latest figures from the Office for National Statistics.

In the 12 months to February, property prices in the capital fell 3.3 per cent, the equivalent of £18,768 off the average home.

But in inner London, the downturn is being felt even more acutely, with the average home falling by £36,699 from £659,520 to £622,821, representing a 5.6 per cent fall over the past year.

Inner London is made up of the City of London and 13 boroughs – Camden, Hackney, Hammersmith and Fulham, Haringey, Islington, Kensington and Chelsea, Lambeth, Lewisham, Newham, Southwark, Tower Hamlets, Wandsworth, and Westminster. 

Meanwhile, in the north of England prices are still rising, according to the ONS figures, which is based on Land Registry data on homes that have sold. 

In Yorkshire and the Humber prices are 3.9 per cent higher than a year ago on average. As of February, the average home was selling for £209,000 in the region.

The north west and north east of England have also seen values rise, with average prices up 3.4 per cent and 3.6 per cent respectively year-on-year.

London is not the only property market where homes are losing value, however. Homeowners in the south east and south west of England are also seeing the value of their properties fall.

The average home in the south east is down 0.9 per cent in the 12 months to February and in the south west, prices are down 0.6 per cent on average.

Looking at the UK as whole, property prices are up 1.2 per cent over the past year, with the typical home fetching £268,000.

What’s behind the fall in house prices?

The market for flats, and especially new-build flats, is struggling which is affecting house prices in London. 

The average price of a flat in England has fallen from £224,000 to £216,000 – the equivalent of 3.8 per cent year-on-year, according to the ONS. 

Meanwhile, the average semi-detached house has risen by 2.6 per cent during that same time.

In London, where flats make up a large proportion of the market than in other regions, the typical flat has fallen 6.1 per cent since February last year.

The typical flat seller in the capital was selling for £448,000 in February 2025. Now they are selling for £421,000.

Conversely, house prices have just about held up in London. The average terraced house has fallen 1 per cent, while semi-detached houses are down just 0.6 per cent year-on-year. 

The reasons for this are multiple. Many of the people who used the Help to Buy scheme are now facing a reality where their homes have often lost value.

The Help to Buy scheme drove demand for new build flats between 2013 and 2021, and pushed prices higher over a sustained period.

The scheme helped more than 375,000 people onto the housing ladder, most of them buying new build flats. 

It enabled first-time buyers to buy a new build with a 5 per cent deposit with the government lending between 5 and 40 per cent of the cost of a new-build home as an equity loan. The loan itself was interest free for the first five years.

Owners of these flats are now selling them to buyers who don’t have the benefit of a 20 to 40 per cent interest-free loan, and at much higher mortgage rates.

Perhaps a bigger issue is that flats are usually owned leasehold which has become increasingly undesirable in recent years.

New-build and older flats are both likely to be leasehold, though some older apartments in house conversions have now changed the ownership structure to give each flat owner a share of the freehold.

Leasehold flats often come with some off putting factors such as having to pay ground rent and service charge to the freeholder or managing agent.

Service charges increased by an average of 41 per cent between 2019 and 2024, according to The Property Institute, and the average leaseholder is now paying £3,634 per year. 

This is also putting off buyers, who are reluctant to commit to extra costs they have little or no control over.

Jonathan Hopper, a buying agent at Garrington Property Finders thinks some of the falls are also being driven by a glut of homes at the market. 

‘These pre-war falls were driven by old-fashioned fundamentals rather than post-conflict volatility. 

‘In many areas, the number of homes for sale exceeded the number of serious buyers and this forced sellers to lower their price expectations and, in some cases, accept offers considerably below asking price. 

Where next for property prices? 

Property insiders think worse could still be to come, with the impact from the Middle East conflict and higher mortgage rates further decimating prices in the south.

The ONS data is lagging the conflict in the Middle East and will only start to reveal its impact in the coming months.

Tom Bill, head of UK residential research at Knight Frank, said: ‘As a result of the Middle East conflict, mortgage rates have climbed, sentiment has been dented and there is speculation about how the Government will respond to the economic shock. 

‘This hat-trick of headwinds means house prices will come under pressure this year.’

Buying agent Jonathan Hopper says that there are opportunities in the market for buyers, however. 

‘The traditional surge in new listings over the Easter weekend means buyers are truly spoilt for choice, and this has created a buyer’s market in which buyers call the shots on both tempo and price,’ he said. 

‘Deals are being done by those who need to move rather than just want to move, and by those who calculate that lower purchase prices more than offset higher borrowing costs.

‘The volatile global backdrop is unsettling, but increasing numbers of buyers are realising that they will own their next home for much longer than the current volatility lasts – and that, for the well informed, market threats can create market opportunities.’