Are House Prices Falling in London?

Concerns about the state of London’s property market have always existed, and in 2025, this is no exception. The capital’s housing sector has long been regarded as a barometer for the wider UK market, and with rising living costs, fluctuating interest rates, and changing work habits, many are wondering: are London house prices falling? 

In short, the answer depends on where you look. Some areas of the capital are cooling, while others are showing signs of recovery or growth. Below, we’ll look at the most recent data, expert predictions, and what it all means for sellers, buyers, and investors.

A market in flux: Are prices actually falling?

According to recent data from Rightmove, the average house price in London currently stands at £678,054. That’s down around 6% from the 2022 peak of £721,950 and 8% lower year on year. However, these figures hide a more nuanced picture. Some boroughs, particularly in outer London, have fared better, while central zones have experienced more significant changes.

Notably, Prime Central London (PCL) has been hit the hardest. Kensington, Mayfair, and Chelsea saw house price reductions of up to 4% in early 2025. This could be caused by ongoing economic uncertainty and international buyer caution, which is reducing high-end demand.

However, the capital is not alone in this. The overall UK property market has seen modest fluctuations. Recent data shows that, while house prices fell slightly in 2024, they have begun to recover in recent months, particularly as inflation and interest rates begin to fall.

Does national recovery affect London?

Property prices in the UK rose by 0.5% in May 2025 compared to the previous month, for an annual increase of 3.5%, with the average UK home now costing £273,427. Analysts had predicted a longer-lasting slump following the end of the stamp duty holiday and the sharp interest rate hikes of 2023-2024, but the market has proven more resilient than expected.

Monetary policy is a major contributing factor to the turnaround. Since August 2024, the Bank of England has cut interest rates four consecutive times, lowering the base rate to 4.25%. Lower borrowing costs have enticed more buyers back into the market, particularly first-time buyers and home movers in the Southeast.

London’s unique drivers

However, London does not always reflect national trends. Because of its status as a global city, which attracts overseas investment, foreign buyers, and a transient workforce, the housing market frequently behaves differently.

The return to office working is having a significant impact on the London property market in 2025. Major employers are now encouraging, or even requiring, more in-person office attendance. This shift is reigniting interest in central and commuter-friendly neighbourhoods like Clapham, Stratford, and Ealing.

In some cases, increased demand is driving prices back up. Some real estate experts predict a modest ‘surge’ in these areas as workers return to city life, reversing a post-pandemic trend of moving further away for space.

What this means for homeowners looking to sell

If you are thinking about selling your home in London, the current market necessitates a careful approach. Prices are down from their peak, but they remain significantly higher than pre-pandemic levels. Furthermore, with buyer interest returning and mortgage rates falling, market conditions are arguably better than they were six months ago.

Here are some key takeaways for sellers:

1. Price realistically

With many buyers still focusing on affordability, pricing your property correctly from the start is critical. Overpricing may cause delays or necessitate multiple reductions, whereas a fair market value is more likely to generate genuine interest.

2. Focus on presentation

In a competitive market, presentation can make all the difference. Decluttered, well-lit, and freshly decorated homes perform better. Consider minor upgrades to kitchens or bathrooms to increase appeal without overspending.

3. Act while conditions improve

With interest rates falling and wages outpacing inflation, confidence is gradually returning. Listing your property during this period of recovery may increase your chances of achieving a high sale price — before the next potential slowdown.

Long-term outlook for London house prices

The outlook for the remainder of 2025 is cautiously optimistic. The capital’s property market is expected to remain stable, with modest growth in select boroughs.

Nonetheless, it’s hard to predict the future. Political uncertainty, the global economy, and interest rate decisions will all continue to impact buyer sentiment. For the time being, the worst of the price drops may have passed.

Need to sell your London property? 

If you’re thinking about selling, now could be a smart time to act. Sell House Fast assists homeowners in achieving a fast house sale or fast flat sale at competitive prices, even in uncertain markets. Whether your property is in Zone 1 or the outer boroughs, we can provide you with a free, no-obligation cash quote and guide you through the entire process.