London house prices have fallen for an 11th consecutive month as the gap between the strongest and weakest regional property markets continues to widen.
Average prices in the capital were 3.3% lower in July than a year earlier, according to the latest UK House Price Index.
It was London’s weakest annual performance since January 2024 and compares with a 4.9% increase in the North East, the strongest-performing English region.
Across the UK, annual house price growth slowed for a third consecutive month to 1.4% in July, down from a revised 1.5% in June.
MARKET SLOWS
The average UK property was valued at £273,000, around £4,000 more than a year earlier.
Prices increased by 0.7% between June and July on a non-seasonally adjusted basis. However, after seasonal adjustment they fell by 0.2% month-on-month.
England recorded annual growth of 1.1%, taking its average property price to £293,000.
Prices increased by 2.6% in Wales to £215,000 and by 2.3% in Scotland to £196,000.
Northern Ireland continued to record substantially stronger growth, with prices rising 9.2% in the year to the second quarter to an average £202,000.
REGIONAL DIVIDE
The UK HPI says the slowdown in annual growth was primarily driven by a sharp deceleration in the South West, with London and the West Midlands also contributing.
Its findings follow evidence of weaker market activity elsewhere.
HMRC figures show an estimated 97,000 residential transactions completed in July on a seasonally adjusted basis, 1.1% fewer than a year earlier and down 1.7% compared with June.
Meanwhile, Bank of England figures show mortgage approvals for house purchases fell to 56,100 during July, below the six-month average of 60,800.
The figures suggest buyers remain cautious despite property prices continuing to record modest annual growth nationally.
INDUSTRY REACTION
Jonathan Hopper, CEO of Garrington Property Finders, says: “London’s fleeting moment in the sun is over. After jumping in value by £9,000 in June, the average property in the capital shed nearly £4,000 in July.
“The capital’s summer surge has not sustained. Prices are again drifting lower, and are now 3.3% lower than they were a year ago. While this is painful for sellers, the sense that there are bargains to be had is starting to tempt back tactical buyers who’d been waiting for the right moment to strike.
“No-one rings a bell when a falling market hits the bottom, but after months of correction it appears that London prices are now bumping along the seabed rather than sinking.
“London is no longer the only region seeing prices drop on an annual basis, as South West England has also dipped into negative territory.
“In the Midlands and East Anglia, the picture is of a slowdown rather than a slide. Only in the North East is price growth still accelerating.
“Two factors explain the enduring north-south divide.”
“Two factors explain the enduring north-south divide. The first is the glut of homes for sale in the south, which allows buyers to bargain hard and forces sellers to swallow their pride if they wish to attract viewings, let alone close a sale.
“The second is the uptick in mortgage interest rates. Even though house prices are flat or falling in much of southern England, the cost of borrowing is rising.
“In the south’s high-value areas, where buyers are especially reliant on mortgage borrowing, each increase in mortgage interest rates makes more homes unaffordable for buyers.
“Today’s jump in consumer inflation means more mortgage interest rate rises could be coming soon, and this will further restrict the number of buyers and apply downward pressure to house prices.
“None of this points to a collapse, but it does point to a thin autumn. Mortgage approvals are running below their six-month average, and transactions dipped in July – blessing buyers with lots of choice and little competition.
“This is a buyer’s market in everything but confidence. The sales that collapse this autumn will fall apart in the gap between what sellers remember their home being worth and what buyers are now willing to pay.
“Close that gap and deals will happen. Sellers who cling on to last spring’s price will find the market has moved on without them.”
BIG REGIONAL DIFFERNCES
Jason Tebb, President of OnTheMarket, says: “The Land Registry figures, while a little dated, show that property values continued to rise on an annual basis in July, with the average property price £4,000 higher than a year ago.
“Increased stock, more choice and squeezed affordability as inflation continues to rise on the back of the Middle East conflict, are keeping property prices in check.
“The national average property price conceals significant regional differences, with values rising by 4.9% in the North East at the same time as contracting by 3.3% in London.
“In the capital, this was the eleventh consecutive fall due to the amount of stock available and buyers finding it harder to raise the necessary finance to afford more expensive homes.
“Some of the biggest lenders have increased their mortgage rates in recent days on the back of higher funding costs and the expectation of further interest rate rises from the Bank of England.
“The Bank’s decision to hold base rate for five consecutive meetings has provided welcome stability, enabling buyers and sellers to plan ahead with more confidence, and it is hoped this consistent approach continues for a while at least.”
‘SUPPLY REMAINS TIGHT’
Amy Reynolds, Head of Sales at Richmond estate agency Antony Roberts, says: “We’re seeing a sensible, needs-driven market: well-presented homes priced correctly are selling, and those pitched too hopefully are sitting.
“We expect a quieter-than-usual September and October in terms of new stock coming to market as people ‘wait and see’ ahead of the Budget.
“However, stamp duty isn’t changing on 28 October, so there’s little to be gained by holding off, and every week you stall is another week for a chain to wobble. Exchange when your paperwork is ready, not when the Chancellor sits down.
“Rents are a different story. Supply remains tight as landlords continue to leave the sector, so tenants face stiff competition for good homes, and we don’t see that easing this autumn. Overall, we’re hoping for a post-Budget bounce and a busy December setting us up well for 2027.”
