London Predicted to Experience Sharpest Decline in House Prices in the UK
London is poised to witness the steepest decline in house prices across the UK, as property agents report that the capital is facing significant challenges from economic uncertainty and rising taxes.
According to the Royal Institution of Chartered Surveyors (RICS), the indicator for new buyer enquiries has dropped to its lowest point since November 2023. Additionally, surveyors indicated a decrease in agreed home sales for February.
The situation in London is particularly dire, as the city has seen the most significant decrease in property transactions and one of the largest declines in buyer demand nationwide. Agents forecast that London home values will decline more sharply over the next three months than in any other region.
“Sales are sluggish, with low confidence stemming from uncertain political and economic outlooks,” commented William Delaney, a property consultant at Coopers of London. “Traditional motivations for buying—such as expanding family, better school zones, and transport links—don’t hold as much weight in central London. Buyers are seeking stability and confidence.”
Adding to the strain on London’s housing market, the urgency to finalize purchases before the expiration of property tax relief in April seems to be dissipating. Given that the average homebuying process takes around five months, those who have just started now are unlikely to meet the deadline.
“The UK housing market seems to be losing steam as the end of the temporary stamp duty threshold increase approaches,” stated Simon Rubinson, RICS’s chief economist. “Concerns are also being raised about the possibility of inflationary pressures resurfacing and the increasingly uncertain geopolitical landscape.”
Rising living costs further dampen demand, with potential buyers struggling to save for deposits amidst soaring food and energy prices along with high rental costs. Relief from the Bank of England appears minimal, as officials are adopting a careful approach to adjusting borrowing rates.
Chancellor Rachel Reeves has cautioned that U.S. President Donald Trump’s tariffs could exacerbate the situation by driving up inflation and hindering growth.
First-time buyers in expensive regions like London are set to feel the most impact when the more generous stamp duty thresholds expire. Missing the upcoming deadline could cost some buyers over £11,000 ($14,251) in additional charges, according to Rightmove.
RICS’s findings align with recent reports indicating that London’s housing market is under pressure from rising taxes, elevated borrowing costs, and squeezed affordability. Mortgage lender Halifax noted that house prices in the capital saw their most significant drop since 2023 in February, with official data revealing that London homes have lost nearly 3% of their real value over the past year.
It’s indeed concerning to see London facing such significant challenges in its housing market. The combination of economic uncertainty, rising costs of living, and higher taxes is clearly weighing heavily on buyer confidence and affordability. As William Delaney pointed out, the usual motivators for buying—such as family needs and school catchment areas—don’t seem to hold the same appeal when the overarching economic environment is in flux.
The potential increase in costs for first-time buyers due to the expiry of the stamp duty relief is particularly alarming. For many, an extra £11,000 could be a dealbreaker, further exacerbating the barriers to home ownership in an already challenging market.
It will be interesting to see how these dynamics evolve in the coming months. If the economic situation remains unstable, it could continue to depress demand in London, while other regions may not feel the same extent of the impact. The role of the Bank of England in managing interest rates will also be crucial, as any changes could either alleviate or intensify the pressures facing buyers. As we watch this situation unfold, it’s clear that those hoping to enter the London market will need to navigate a more complicated and unpredictable landscape.