London house prices fell 3.3% in the year to July 2026, according to official figures, marking the eleventh consecutive month of annual declines and the sharpest contraction for the capital since January 2024.
The figures from the Office for National Statistics show the downturn deepened in July, down from a revised 3.1% fall in June, with inner London bearing the brunt. The more expensive the postcode, the harder it fell: Westminster prices plunged 20.7% to an average of £876,788, while Kensington and Chelsea dropped 14.1% to £1,232,640.
London house prices: prime boroughs bear the brunt
Five London boroughs recorded annual falls of 10% or more in the year to July 2026. The City of London fell 17.4% to £710,652 and Tower Hamlets 14.4%, joining Westminster and Kensington and Chelsea in double-digit decline. Camden’s annual losses jumped from 7.1% to 10.1%, dragging the average price down to £815,159.
Hammersmith and Fulham fell 9.0% to £738,048, narrowly missing the 10% mark, while Lambeth dropped 6.3%, Newham 5.0%, and Barnet and Islington 4.9% each. The ONS cautioned that the City of London figures can be volatile because of low numbers of sales transactions, urging that they be read against longer-term trends.
Sarah Coles, head of personal finance at AJ Bell, told Mortgage Introducer: “London’s prices are so high that stamp duty bites harder here than anywhere else, and plenty of would-be buyers simply don’t have that kind of headroom left.”
Stamp duty pressure and the looming mansion tax
The figures land as the capital’s most expensive homes face a new annual charge. The mansion tax — officially the High Value Council Tax Surcharge, confirmed in last year’s Budget — will be based on 2026 property valuations, with charges hitting owners from April 2028. The bands run from £2,500 a year for homes worth £2 million to £2.5 million up to £7,500 for anything above £5 million, as previously reported.
Mortgage Introducer noted that a property which has lost value this year could land in a cheaper band than it would have done twelve months ago, making an up-to-date 2026 valuation worth getting right for owners near a threshold.
Lenders are already feeling the strain. Down-valuations are creeping up across the market: the average newly listed property is now priced 11.6% above its independent valuation, more than double last year’s 5.7% gap, according to data from TwentyCi cited by Mortgage Introducer, with the gap widening fastest where the market is falling.
Outer London holds up as the north surges
While inner London slid, parts of outer London escaped the gloom. Barking and Dagenham rose 5.3% to £375,604, Kingston upon Thames was up 3.3%, and Waltham Forest gained 2.8%. England as a whole saw prices rise 1.1% to an average of £293,000, with the North East leading growth at 4.9%.
Aaron Jassi, a mortgage adviser at Chase de Vere who works mostly with high-net-worth clients, told Mortgage Introducer that buyers trying to time the market usually end up regretting it, because a good mortgage rate can vanish within a day.
The price falls are being driven hardest by apartments. Across England, flats and maisonettes showed the weakest annual change of any property type, down 3.5% to £217,000, while semi-detached houses rose 2.7% to £292,000 — a pattern that bears most heavily on the capital, where flats make up a far larger share of the market.
The ONS noted that estimates for the most recent months are provisional and will be updated as more sales data is incorporated. The August 2026 UK House Price Index will be published at 9.30am on 21 October.
Reporting based on the Office for National Statistics UK House Price Index for July 2026 and Mortgage Introducer.
