London's Wealthiest Boroughs Experience Sharpest House Price Declines
House prices in London's most affluent boroughs have plummeted at their most rapid rate since the global financial crisis, according to the latest official data. The dramatic downturn in November followed significant speculation about potential property tax changes in the lead-up to Chancellor Rachel Reeves' Autumn Budget, coupled with ongoing affordability constraints that have dampened market activity across the capital.
Record Declines in Prime Central London
The Office for National Statistics revealed that house prices in the capital fell by 4.6 percent year-on-year in November, following a 4.3 percent decline in October. This represents the most substantial consecutive monthly decrease since the financial crash, when prices experienced double-digit percentage drops. The most pronounced falls were concentrated in London's wealthiest neighbourhoods, though the city maintains its position as the UK's most expensive property region.
Kensington and Chelsea witnessed a staggering 16.3 percent annual price reduction, bringing average property values down to approximately £1.19 million. Westminster followed closely with a 15.5 percent decline to an average of £866,000. In striking contrast, outer London boroughs demonstrated resilience, with Havering and Bromley reporting annual increases of 5.2 percent and 6 percent respectively. This divergence contributed to an overall 1.2 percent fall in London's average house price over the year to November, settling at around £553,000.
Budget Speculation Creates Market Uncertainty
The period leading up to the Autumn Budget was characterised by significant uncertainty, as rumours circulated about potential taxes on high-value properties. Many prospective buyers adopted a cautious "wait and see" approach, resulting in subdued demand throughout November. Colleen Babcock, a property expert at Rightmove, observed that home-movers were particularly attentive to potential Budget measures that could affect their personal financial situations.
Chancellor Reeves ultimately introduced a new high-value council tax surcharge for properties valued above £2 million, scheduled to take effect in April 2028. This additional levy, informally termed a 'mansion tax', will operate across four price bands, ranging from £2,500 for properties valued between £2 million and £2.5 million, up to £7,500 for those exceeding £5 million. The measure is projected to generate approximately £0.4 billion in revenue for central government by 2029-30.
Other anticipated tax changes, including potential reforms to stamp duty and the introduction of capital gains tax on primary residences, created further apprehension but were ultimately excluded from the final Budget plans. Jason Tabb, president of On The Market, highlighted that increased property supply, reduced buyer demand, stretched affordability, and higher living costs collectively weakened London's housing market.
Rental Market Faces Supply Crisis
Despite falling property prices, London's rental market continues to experience severe pressure, with average rents reaching £2,268 per month – the highest in the country and nearly triple the £762 average in the North East. Analysts attribute these soaring rental costs to landlords exiting the market, thereby reducing available rental stock.
Nathan Emerson, chief executive of Propertymark, emphasised that the rental sector suffers from chronic undersupply relative to demand. He noted that updated legislation and increasingly complex tax frameworks have created operational challenges for landlords, placing additional strain on already limited housing stock.
National Picture Shows Regional Variation
While London experienced significant declines, the national average house price increased by 2.5 percent to £271,000 in November, up from 1.9 percent in October. This marked the first acceleration in prices since June, with the North East recording the strongest growth at 6.8 percent, followed by the North West at 4.1 percent.
Property sector analysts anticipate that falling mortgage rates will provide further support to the market in 2026, though they stress that buyer confidence remains crucial. Paige Tao, an economist at PwC UK, suggested that with the Budget proving less disruptive than feared and the Bank of England reducing interest rates in December, confidence is gradually returning, potentially leading to increased activity in the new year.
Tom Bill, head of UK residential research at Knight Frank, identified confidence as "the key missing ingredient" for many buyers navigating both economic and political volatility. As the market adjusts to new tax measures and economic conditions, the coming months will reveal whether London's prime property market can regain its footing or whether the shift toward outer boroughs represents a more lasting trend.
