London house prices: Is the capital's property boom over?

The London property market has historically been attractive for many reasons, in particular for its potential for long-term growth and demand.

The average house price across the capital grew by 569% between 1990 and 2022, according to the Land Registry.

However, in recent months, property prices in London have fallen – between June 2025 and June 2026, the average house price fell by more than 2% from £568,050 to £553,870.

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The capital’s housing market has struggled for a number of reasons, including higher mortgage rates. High stamp duty costs have also squeezed affordability and reduced housing supply.

Recent research from Zoopla found 99% of home movers pay stamp duty when buying a home in London compared to 63% in the North East.

Richard Donnell, executive director at Zoopla, said when the cost of moving becomes more expensive due to stamp duty costs, “some of those moves don’t happen”.

Recent tensions in the Middle East and fears over what a new prime minister means domestically have done little to help stimulate the market.

Could London’s fortunes change any time soon and will it continue to attract buyers and property investors?

Premium market house prices plummet

The prime London housing market is one area which has faced particular hardship lately.

Average house prices have dropped 25% over the past 12 months in Westminster. The average property price in the borough was £1,144,822 in June 2025, according to Land Registry, but in June 2026 it had fallen to £854,198.

In Kensington and Chelsea, the average house price fell 14% from £1,466,106 to £1,250,149 over the same period.

In the City of London, house prices fell 20% from £895,675 to £712,958.

Stuart Bailey, head of super prime London sales at estate agent Knight Frank, said some sellers having to heavily discount their properties to get attention from buyers was “dragging” the overall premium market down.

He said: “It’s the binary nature of the current market that is causing what seems like steep drops.

“It’s almost a polarised market of extremes; premiums paid for the very best in class type of property; a fabulous address, lovely views, immaculate style and newly refurbished, or not.

“So if that’s not what you have…then the market is significantly reduced and you need to be highly attractively priced to get attention.”

Source: Land Registry, June 2026

What are estate agents and surveyors saying about the London market?

In the Royal Institute of Chartered Surveyors’ (RICS) latest survey, one estate agent said activity in London had picked up over the preceding few weeks, but high levels of stock, particularly of flats, meant buyers were not as committed.

Another estate agent said activity levels had been low over the summer months, as the economic and political climate was hampering confidence.

Meanwhile, a surveyor responding to the survey said the market was flat, with the downward trend fuelled by sellers struggling to find buyers.

Will London house prices rise in 2026?

If London’s house prices rise this year, the growth will be nominal. Knight Frank’s latest forecast for 2026 predicts house price growth of just 1% in Greater London – well below the current rate of inflation.

The estate agent also expects prices in London’s most expensive postcodes to flatline or fall by up to 2% this year.

Savills predicts average property prices across the second-hand market in the capital will fall by 4% in 2026. A second-hand home is one that has been previously owned and lived in.

The estate agent believes prime central London house prices will fall by 3% and outer prime London house prices will fall by 2% in 2026.

Is London property still worth investing in?

There is a mixed approach for investors. Some are selling due to costs and tax pressures, whereas others remain invested as London continues to show signs of resilience and rental demand.

According to Barratt Homes, there are 2.7 million private renters in London, providing opportunities for landlords.

London continues to attract interest from foreign buyers too. Estate agent Hamptons said it saw an 8% rise in applications for properties in the capital from overseas buyers in the first three months of 2026 compared to the same period in 2025.

James Mulvaney, head of digital at property finance brokers Clifton Private Finance, said despite the challenges facing landlords, there was also potential for growth for those applying the Buy, Refurbish, Refinance, Rent (BRRR) method.

Despite its challenges, London could continue its resilient streak, attracting buyers, as well as both foreign and domestic investors, as rental yields could deliver a return on investment, with the average rental yield in London ranging between 5% and 6%.

However, some landlords may take a more cautious approach following changes laid out in the Renters’ Rights Act, which came in from May 2026. Under the new rules, landlords are limited to advance rental payments of one month and they cannot unreasonably refuse a tenant’s request for a pet. Fixed term tenancies have also been abolished, with renters automatically switched to rolling tenancies, and rent can only be increased once per year.