London homeowners are facing falling property prices, with new figures showing that 85 per cent of homes across the capital are now in areas where values have dropped year on year.
The data comes from Zoopla’s latest house price index, which covers the period to the end of September 2026. It paints a picture of a market that has turned decisively in buyers’ favour in the capital, even as prices continue to rise in much of the rest of the country.
Across the UK as a whole, more than a third of homes — 35 per cent — are now in areas experiencing year-on-year price declines. That is a sharp rise from 12 per cent a year ago, and the falls are concentrated in London and the South East.
Higher mortgage costs are at the heart of the shift. With borrowing more expensive, buyers have become more selective, and with more homes on the market they have greater room to haggle. The number of homes for sale is up seven per cent compared with last year.
Richard Donnell, executive director at Zoopla, said: “The extra cost of mortgages has made home buyers more selective while greater choice of homes for sale has increased the scope to negotiate on price.”
“The impact is being felt by sellers in southern England where house price falls are most concentrated as average prices continue to rise across the rest of the country.”
“There is still demand to buy homes, and those that are well priced and presented are selling just as quickly as last year.”
“Getting the price right from the start is essential,” he added. “Overpricing significantly reduces the chances of selling, so sellers should seek advice from local agents on buyer demand and the right asking price for their home.”
London average now £523,100
The headline figures show just how wide the regional gap has become. The average UK house price stands at £273,100, up 0.8 per cent on a year ago. London’s average is £523,100, down one per cent year on year, while the South East recorded an average of £382,600, down 0.6 per cent.
At the other end of the scale, Northern Ireland led UK growth at 5.8 per cent, taking its average price to £200,800. The North West grew 3.2 per cent, Scotland 2.5 per cent, the North East 2.4 per cent and Wales two per cent.
Some areas in the North West and Scotland are seeing annual growth of more than three per cent, with house prices rising by more than four per cent in postcode areas in Liverpool, Carlisle and Kilmarnock.
For Londoners, the figures land against a backdrop of already stretched affordability. Official earnings-based measures recently put Bexley joint-lowest in the capital on a price-to-earnings basis, yet even there the average home still costs £415,000 — a reminder that “cheapest” in London terms remains a long way from cheap. Our earlier look at why Bexley ranks as the capital’s most affordable borough for buyers sets out the full borough-by-borough picture.
The capital’s housing market is also being reshaped by development decisions. In Canada Water, one of London’s biggest regeneration schemes has reportedly paused its next phase, a sign of how developers are reassessing large projects as costs and demand shift. Read more about the reported pause at Canada Water.
First-time buyers and the Budget
In response to ongoing affordability concerns, the Government recently announced the Your First Home scheme. Under the initiative, first-time buyers will be able to purchase a new-build property with a 2.5 per cent deposit, with the Government providing an additional 20 per cent loan.
Full details will be released in the upcoming Budget, including income and property price caps designed to ensure the scheme targets those most in need. The Budget will also allocate more than £1 billion for social and affordable housing and grant greater powers and funding to mayors and regional leaders in England.
Zoopla expects activity to strengthen once mortgage rates start moving back below five per cent. Changes to stamp duty could support buyers and sellers, particularly in southern England where transaction costs are highest. The Your First Home scheme is positive for the new homes industry and, if designed well, could stimulate demand and support wider housing market activity in 2027.
Nathan Emerson, chief executive of Propertymark, said: “The housing market is becoming increasingly localised, with higher mortgage costs putting pressure on affordability, particularly in southern England.”
“While increased choice is giving buyers greater scope to negotiate, realistic pricing and informed advice from property professionals remain essential to achieving successful sales.”
“Despite regional price falls, demand remains, but buyers are increasingly selective and focused on value.”
For sellers in London, the message from both Zoopla and Propertymark is the same: price realistically from the outset, or risk sitting on the market while better-priced homes sell. For buyers, the combination of more choice and softer prices in the capital may mean the best negotiating position they have had in years — provided they can still afford the mortgage.
