London house prices were stagnant last year, new figures show, as affordability constraints put pressure on buyers in the capital.
London house prices were flat in the year-to-December, new figures from the Office for National Statistics (ONS) show, down from 0.5 per cent growth recorded last month.
This meant the average property in the capital remained stuck at £549,000. Factoring in inflation, London properties lost 2.7 per cent of their value.
Across the rest of the UK, house prices increased by 4.6 per cent last year, the fastest rate of annual house price growth in 23 months. It means the average property fetched £268,000.
House prices across the country had a strong year in 2024 thanks to the combination of rising real incomes and interest rate cuts, but this was insufficient to support the London property market, where prices are so much higher.
Source: ONS
According to Halifax, London has a house price to earnings ratio of 8.22, compared to a national average of 6.55.
Recent ONS figures show that the cheapest areas in London were still less affordable than the most expensive areas in the north east.
This means that the more expensive London property market is still struggling to adapt to higher interest rates, which have forced up costs for borrowers significantly.
Jonathan Hopper, chief executive of Garrington Property Finders also said that the Budget was putting pressure on the capital’s housing market.
“Not since the heady post-lockdown ‘race for space’ has the divergence between London prices and the rest of the UK been so stark,” he said.
“This is partly a whiplash effect from the tax rises announced in the Chancellor’s October Budget, which hit sentiment hard at the top end of the market. Buyers in the capital have since become highly price-sensitive, and willing to negotiate hard on price or simply look elsewhere,” he said.
From April, house buyers will start paying stamp duty on properties worth over £125,000, instead of £250,000 at the moment, while first-time buyers will start paying the levy on homes up to £300,000, down from £425,000 previously.
Chancellor Rachel Reeves also increased the rate of capital gains tax to 24 per cent for higher-rate taxpayers.