London House Prices Falling: Some Areas Down 25% as Rents Rise

London is the weakest housing market in the UK on the latest official figures, and the weakness is concentrated in a handful of central boroughs rather than spread evenly across the capital. Average London prices dropped 2.5% in the year to June 2026 while rents rose 3.0% in the year to July, a split that changes the maths for buyers, movers, remortgagers and landlords in different ways. This article sets out the borough-by-borough figures, explains why prime central London is carrying the losses, and covers what a softer valuation does to your loan-to-value and your options. Mortgage One is a whole of market mortgage adviser arranging purchase, remortgage and buy-to-let mortgages for borrowers across London’s 32 boroughs.

If you are buying in London with a deposit of 10% or more and want to know which lenders will value a flat fairly in a falling market, call 01202 155992 or contact Mortgage One.

Are house prices falling in London, and by how much?

Yes. The average London house price fell 2.5% in the 12 months to June 2026, taking it to £554,000 from £568,000 a year earlier, while the UK average rose 2.0% to £272,000. Prices fell in 18 of the 32 boroughs and rose in 14, so the London figure hides two very different markets inside one city.

The Office for National Statistics (ONS) figure for London is an average across every sale, so a 2.5% fall sounds mild. The borough data below shows it is not mild where it is happening. Westminster, Kensington and Chelsea, Hammersmith and Fulham and Tower Hamlets are all down by double digits, and those four boroughs carry enough value to drag the whole capital negative while outer boroughs such as Havering post gains. London’s annual fall has actually narrowed, from 3.1% in May to 2.5% in June, which points to a market finding a floor in price terms rather than one accelerating downwards.

Westminster down 25%: the boroughs with the steepest falls

Westminster recorded the sharpest fall in London, with the average price down 25.4% to £854,000 in June 2026 from £1,145,000 a year earlier. Kensington and Chelsea fell 14.7% to £1,250,000, Hammersmith and Fulham 13.3% to £726,000, Tower Hamlets 13.1% to £457,000 and Islington 8.1% to £673,000. Every one of those five is an inner borough.

Westminster’s fall is flat-led. Flats and maisonettes in the borough averaged £758,000 in June 2026, down 25.7% on the year, and the average home bought with a mortgage fell 25.2% to £837,000. First-time buyers in Westminster paid an average of £766,000, 25.3% lower than a year earlier. That is the clearest answer to anyone asking whether London flat prices are falling: in prime central London they are, and steeply.

Kensington and Chelsea remains London’s most expensive borough even after a £216,000 fall, from £1,466,000 to £1,250,000. Hammersmith and Fulham dropped from £837,000 to £726,000 over the same 12 months. These are markets where the buyer pool is thin, international and sensitive to tax, so a modest shift in demand moves prices a long way.

Tower Hamlets is the outlier, because it is not a prime market. The borough is dense with newer flats around Canary Wharf and the Isle of Dogs, and its 13.1% fall to £457,000 reflects the volume of that stock coming to market and lender caution on high-rise flats with building safety or service charge questions, as much as the tax story affecting the west of the city.

Where London house prices are still rising

Outer London boroughs are holding or gaining. Havering’s average price rose 3.9% to £457,000 in June 2026, Enfield was flat at £471,000, and Greenwich edged down 0.5% to £465,000. The pattern is simple: the further from Zone 1 and the lower the price point, the less the market has moved over the year.

Havering at £457,000 now matches Tower Hamlets on average price, which would have been hard to imagine three years ago. The difference is the buyer. Outer-borough purchases are dominated by owner-occupiers buying with a mortgage, whose budgets are set by income multiples and fixed-rate pricing rather than by stamp duty surcharges or overseas tax rules. With Bank Rate held at 3.75% and lenders still competing on fixed rates, that demand has not gone anywhere, and our UK mortgage rate forecast page covers where the base rate is expected to head next.

Why London rent prices are rising while values fall

London rents rose 3.0% in the 12 months to July 2026 to an average of £2,317 a month, up from £2,250 a year earlier. Islington led with a 5.9% rise to £2,854, followed by Greenwich at 5.6% to £1,980 and Enfield at 5.1% to £1,821, while Westminster rents fell 2.0% to £3,179 as its sales market repriced.

Rents increased in 30 of the 32 London boroughs over the year to July 2026 and fell in only two, so the rental squeeze is close to capital-wide even as values fall in the centre.

London rental inflation had slowed to 2.2% in June 2026, so July’s 3.0% is a re-acceleration rather than a fade, and it sits against UK rental growth of 3.7% to £1,393 a month. Flats remain the cheapest UK property type to rent at £1,361, and one-bedroom homes average £1,132, which is where much of London’s would-be first-time buyer demand is currently parked.

Falling prices and rising rents are not a contradiction. Landlords have been selling out of London, which removes rental stock, and tenants who would otherwise have bought are staying put while they wait for clarity on prices. Our coverage of London landlords selling up sets out the supply data behind that trend. For a landlord, a lower purchase price paired with a higher achievable rent improves the rental cover calculation that lenders run, and our buy-to-let rental stress test calculator shows how that lands at today’s stressed rates.

For a free initial consultation on a London buy-to-let purchase where the rent now covers more of the loan, call 01202 155992 or contact Mortgage One.

Is this a London house price crash or a prime-market correction?

It is a prime-market correction, not a London-wide crash. Four central boroughs are down between 13% and 25%, yet 14 of the 32 boroughs rose over the year and outer London is flat to positive. A crash needs forced sellers across the whole market, and the falls here are concentrated in tax-sensitive, cash-heavy prime stock.

The drivers in prime central London are specific and mostly fiscal. Stamp Duty Land Tax on a £1,250,000 purchase in England is £68,750 for a home mover and £131,250 for anyone buying an additional property once the 5% surcharge is added, so transaction costs alone account for a meaningful slice of the price falls being recorded.

On top of that sits the High Value Council Tax Surcharge, an annual charge from April 2028 on homes valued at £2 million or more in 2026 prices, starting at £2,500 a year and rising to £7,500 for homes above £5 million. Our mansion tax guide explains how that feeds into lender affordability checks. A buyer pool that was already international and discretionary has stepped back while those costs are priced in.

Outside the centre the picture is a conventional, rate-sensitive market. Bank Rate has been held at 3.75% since December 2025 and the Bank of England’s vote on 30 July 2026 was 6-3 to hold, with three members voting for a rise. That keeps fixed-rate pricing broadly where it is and keeps owner-occupier demand steady, which is why Havering and Enfield are not following Westminster down. The national picture, where prices are still rising but slowing, is covered in our UK house prices falling article.

Is now a good time to buy in London, or will prices fall further?

For an owner-occupier buying a flat in central London, the entry price is 13% to 25% lower than a year ago and the rent on the alternative is rising, which is a materially stronger buying position than twelve months ago. Whether prices fall further depends on the borough, and outer London shows no sign of following the centre down.

Timing the bottom is not possible and not necessary. What matters is whether the property you want sits in a market that has already repriced, and whether your deposit and income support the loan at current fixed rates. A buyer putting 10% down on a £758,000 Westminster flat needs a £75,800 deposit, and the same flat averaged around £1,020,000 a year earlier, so the cash needed has fallen by over £26,000 before anything else changes.

Stamp duty on that £758,000 purchase is £27,900 for a home mover, and our stamp duty calculator gives the figure for any price and buyer status. First-time buyer relief, which removes the tax on the first £300,000 of a purchase up to £500,000, is still out of reach in Westminster but now within it in Tower Hamlets, Greenwich, Enfield and Havering, where average prices sit between £457,000 and £471,000. Our first-time buyer mortgage guide covers deposits and affordability at those price points.

What falling London prices mean for your mortgage

A lower valuation raises your loan-to-value, and loan-to-value sets your rate band and your lender choice. A remortgage on a Tower Hamlets flat bought at £500,000 with a 15% deposit now values around 13% lower, which moves the loan from 85% to roughly 98% of value and leaves a product transfer with the existing lender as the realistic route.

The reverse is true for anyone with equity. A borrower who bought in Westminster a decade ago and is remortgaging at 50% loan-to-value moves to around 67% after a 25% fall and keeps access to most of the market. Our LTV calculator shows which band a revised valuation puts you in, and our remortgaging guide covers the product transfer route where a new lender will not value high enough to switch.

For buyers, lenders lend against the lower of price and valuation, so a falling market produces down-valuations when a surveyor leans on comparables from three months ago that sit above today’s agreed prices. Large loans in prime boroughs, where private banks and specialist lenders price on the whole relationship, are covered in our large mortgage guide. A whole of market mortgage broker who knows which valuation panels each lender uses matters more in a falling market than in a rising one.

To have a London purchase or remortgage placed with a lender that will value the property fairly, call 01202 155992 or contact Mortgage One.

Figures as of 21 August 2026, London.

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The information provided in this article is for general guidance only and does not constitute personal or regulated financial advice. If you’d like to understand what these moves could mean for you, speak to Mortgage One. We can explain your options and timings based on your specific circumstances.

FAQs

1. Is 2026 a good time to buy a house in London?

It depends on the borough. Central boroughs have repriced by 13% to 25% over the year to June 2026 while outer boroughs are flat to slightly up, so a buyer in Westminster or Tower Hamlets is entering at a materially lower level than twelve months ago. The decision rests on your deposit, affordability at current fixed rates and how long you intend to hold the property, rather than on trying to call the bottom.

2. Why are houses not selling in London at the moment?

In prime central London the buyer pool is thin and sensitive to tax, and the stamp duty surcharge on additional properties and the surcharge coming on homes above £2 million have pushed some international and discretionary buyers to the sidelines. Sellers who anchor to 2025 prices then sit unsold. In outer London, homes are still selling to mortgaged owner-occupiers, which is why those boroughs are not falling.

3. Will London house prices fall further in 2026?

The annual fall narrowed from 3.1% in May 2026 to 2.5% in June, which suggests the pace of decline is easing rather than accelerating. Further falls are most likely in the central boroughs where the fiscal drivers have not gone away. Outer boroughs such as Havering, Enfield and Greenwich are already flat to positive and there is nothing in the data pointing to them turning negative.

4. Are London flat prices falling more than houses?

In Westminster, yes. Flats and maisonettes fell 25.7% over the year to June 2026 against a 23.4% fall for terraced houses, and flats make up most of the stock in every central borough. Service charges, lease length and building safety documentation all narrow the lender pool for flats, which adds lending friction to the price fall.

5. Why are rents rising in London when house prices are falling?

Rental supply has shrunk as landlords sell, and tenants who might have bought are renting for longer while prices settle. London rents rose 3.0% in the year to July 2026 and increased in 30 of the 32 boroughs, so demand for rented homes is outrunning supply even as sale values fall in the centre.

6. Which London boroughs have seen the biggest house price falls?

Westminster fell 25.4%, Kensington and Chelsea 14.7%, Hammersmith and Fulham 13.3%, Tower Hamlets 13.1%, Islington 8.1% and Camden 7.1% over the year to June 2026. All six are inner boroughs, and all but Tower Hamlets are prime or near-prime markets where cash and overseas buyers set the price.

7. Does a mortgage broker help when buying in a falling London market?

Yes, on two fronts. A broker knows which lenders value flats, new-build and ex-local authority stock fairly and which panels are down-valuing aggressively, and can place the case accordingly. A broker also works the loan-to-value: if a lower valuation pushes you into a higher band, the right lender or a product transfer can keep the rate and the loan workable. Mortgage One does this for London purchases and remortgages from the whole of market.