London Housing Market Sees Dramatic Shift as Buying Becomes More Affordable Than Renting
In a significant reversal of long-standing trends, more than a third of London homes are now cheaper to purchase with a mortgage than to rent, according to the latest Zoopla house price index. This remarkable shift comes as capital property prices have contracted over the past year, creating unprecedented opportunities for prospective homeowners.
Affordability Transformation Across the Capital
The proportion of London properties where buying represents better value than renting has doubled since last year, surging from 18 percent to 36 percent. While this figure remains slightly below the national average of 40 percent, it marks a substantial improvement in housing affordability within one of the world's most expensive property markets.
Richard Donnell, Zoopla's executive director, emphasized this turning point: "Lower mortgage rates and improved affordability mean now could very well be the best time to buy a home in recent years, especially for first-time buyers with more homes available to purchase for less than the cost of renting."
Mortgage Rates Create Buyer Opportunities
The affordability improvement stems largely from declining mortgage rates, which have created some of the most favorable conditions for buyers in several years. Both two-year and five-year fixed-term mortgage deals have dipped below four percent for the first time since 2022, substantially reducing borrowing costs.
Nationally, 40 percent of properties listed on Zoopla are now cheaper to buy with a 30-year mortgage and 20 percent deposit than to rent, representing a significant increase from 25 percent year-on-year. In some regions like the North and Scotland, this proportion exceeds 50 percent, though London's improvement remains particularly noteworthy given its historically prohibitive costs.
Market Activity Shows Signs of Recovery
February is poised to set a decade-long record for newly listed properties across the national market, indicating renewed confidence following extended uncertainty surrounding budget speculation. House-buying activity has rebounded sharply from the end of 2024, though sales agreements remain three percent below February 2025's peak activity levels.
In London specifically, the number of homes available for sale has surged 16 percent compared to this time last year, far exceeding the six percent national average increase. This growing inventory reflects both delayed plans activated after last year's budget and landlords seeking to exit the market amid increasing regulatory requirements.
Price Adjustments and Supply Dynamics
London house prices have declined by 0.2 percent year-on-year, contrasting with modest national price inflation of 1.3 percent that remains subdued compared to recent trends. Housing experts warn that supply in the capital is beginning to outstrip demand, creating downward pressure on prices.
Tom Bill, head of UK residential research at Knight Frank, explained: "House prices are being kept in check by rising supply as plans delayed by last year's Budget are activated and more landlords attempt to sell due to red tape." He further cautioned that housing market plans could face additional delays once a potential Labour leadership race commences.
Long-Term Affordability Concerns
Despite current improvements, industry leaders emphasize the need for sustained policy action to ensure lasting affordability. Nathan Emerson, chief executive of Propertymark, stressed that rising house prices must be matched by significant increases in affordable housing stock.
Labour has committed to building 1.5 million homes before the next election, including 440,000 in London, but current progress suggests this ambitious target may be at risk. Emerson highlighted the critical importance of meeting housing delivery goals: "Meeting housing delivery targets will be crucial to ensuring long-term affordability and preventing buyers from being priced out of areas seen as more attainable."
The current market conditions represent a rare window of opportunity for London buyers, particularly first-time purchasers who can now access favorable mortgage terms while benefiting from increased inventory and moderated prices. However, the sustainability of these improvements depends on both market forces and policy decisions in the coming months.
