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As the world navigates the post-pandemic era, the London UK housing market, often seen as a bellwether for the rest of the United Kingdom, continues to evolve in fascinating ways.

This market has historically been the first to react to broader national trends, setting the pace for the rest of the country. 

However, since the government restrictions surrounding the pandemic have lifted, London has begun to show signs of straying away from the normalities of the standard housing market. Currently, some of your highest yielding rental properties can be found in the North of England, a long way from the tarmacked streets of the big smoke. 

In this article, we will be covering the house price drops in London, its resilience during the pandemic and what’s happened to it since.

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Are house prices dropping in London 2024?

So far in 2024, there has been an unexpected surge in the London UK housing market, characterised by a 19% increase in buying demand and a 15% rise in new property listings. This surge has been partly driven by financial markets anticipating interest rate cuts. 

Usually, increased demand and lower interest rates can lead to higher house prices, however, the current interest rate cuts have enabled more affordable mortgage deals and the allowing the increase in buying power of first-time buyers and has slightly offset the demand-driven price increase.

However, as with any city in the UK, not all of the London UK housing market is homogenous, data from Rightmove, shows house prices dropping in London. The annual growth in London’s house prices was only 0.8% in June 2023, which is significantly lower compared to other regions like the North East of England. 

Various housing experts predict a mixed outlook for the  London UK housing market in 2024, with some expecting a decline of around 3% in house prices due to the looming General Election and the impact of rising interest rates. 

While others anticipate a cautious optimism, with a possible soft landline and gradual recovery in house prices. But the general consensus seems to point that while house prices might fall, they won’t drop significantly. 

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What is the current house price London trend 2024?

According to recent research by Zoopla, a leading UK property portal, reveals that there’s been an increase in the level of asking price discounts in London, escalating from 2.1% in 2022 to 6.1% in 2024. This trend suggests a growing willingness among sellers to negotiate, often seen in a buyer’s market where house prices are usually lower. 

The London housing market is experiencing divergent trends across different areas. Inner London boroughs are witnessing faster growth in asking prices, contrasting with a drop in asking prices in Outer London boroughs.

Here is an overview of the house price London trend in 2024:

  • Kensington & Chelsea and City of Westminster

These remain the two most expensive boroughs in London, but both experienced a significant drop in year-on-year price growth, with decreases of 9% and 8% respectively. The average price in these areas is now £1,303,740 and £936,940 respectively. 

  • City of London

This borough saw the largest increase in house prices, with an impressive rise of 18%, taking the average house price to £931,190. This increase led to the City of London overtaking Camden to become the third most expensive borough.

  • Outer London boroughs

The trend towards suburban living, accelerated by the pandemic, was evident in boroughs like Richmond, which experienced a 2% increase. In contrast, Hammersmith & Fulham saw a drop of 2%, falling out of the top five for the first time since 2015.

  • Brent & Tower Hamlets

These boroughs are among the biggest movers, with Brent moving from 16th to 13th position, witnessing an 11% increase in house prices to an average of £570,390. Tower Hamlets jumped from 24th to 21st position with a 14% price increase of £492,600.

  • Inner city boroughs

Some inner city boroughs like Hackney and Southwark bucked the trend for inner-city decline, with HAckney moving from 10th to 8th position due to a 12% increase in house prices, and Southwark moving from 17th to 15th with a 10% price rise. 

  • Boroughs that fell behind

Other boroughs, despite seeing price increases, fell in the rankings. These include Wandsworth, Haringey, Ealing, Bromley, Redbridge, Lewisham, and Croydon. The fall in rankings could be attributed to the faster price growth in other boroughs. 

Although there has been a recent decline in mortgage rates they remain elevated compared to the ultra-low rates pre-pandemic. Higher mortgage rates generally make housing more costly, impacting demand and prices. However, a trend of mortgage lenders reducing their rates in London might offer some relief and positively influence the market. 

Are there any London UK housing market influencers to watch?

There are a few other influencers that you should consider when selling your house or buying a property in London, including:

  • Economic outlook: The broader economic environment including inflation rates, employment rates, and economic growth can significantly affect housing demand and affordability. 

  • Government policies: Changes in housing policies, Stamp Duty or rental market regulations could influence both demand and supply in the housing market. 

  • Global events: International events such as geopolitical tensions or global economic shifts, can impact investor confidence and foreign investment in London’s property market. 

Looking ahead, there are signs of a slowdown in new housing starts, potentially leading to a supply shortage. Combined with sustained demand, this could result in price increases towards the end of 2024 or into 2025. This anticipated shortage could be exacerbated by constraints in construction, planning delays, or changes in land availability. 

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Have house prices dropped in London since lockdown?

The London UK housing market has experienced a rollercoaster of changes since the onset of the COVID-19 pandemic, with notable fluctuations in house prices across different areas of the city. This period has been marked by shifts in buyer preferences, economic policies, and wider societal changes. 

Pre-pandemic levels & early impact

Before the pandemic struck London in 2019, the property landscape was relatively stable. The average house price at this time was £484,000, reflecting a modest growth of 2.3% from 2018. This period was characterised by steady demand and a balanced supply, laying the groundwork for the forthcoming shifts induced by the pandemic.

Surge during the pandemic peak

As COVID-19 took hold in 2020, causing global disruptions, the London UK housing market surprisingly witnessed a surge in prices. DUring this peak pandemic year, the average house price in London rose to £496,000 marking a 3.5% increase since 2019.

The growth was partly fueled by a notable shift in buyer preferences - with an increased demand for properties offering more space and access to outdoor areas, as remote working and lockdowns changed living patterns. 

Properties in suburban areas and those with gardens or larger living spaces became particularly sought after, outstipping supply and leading to competitive market conditions and rising prices. 

Continued growth as restrictions eased

In 2021, as the pandemic’s grip began to relax and restrictions eased, the housing market continued its upward trajectory. The average house price in London climbed to £521,000, growing by an impressive 5.5% from the previous year. 

This growth can be attributed to the continued demand for more spacious properties and the lingering effects of the Stamp Duty Holiday, which provided a temporary financial incentive for buyers. 

Peak and subsequent decline

The upward trend persisted into 2022, with London’s average house price reaching £543,000, a 6.7% increase from 2021. However, by the end of 2023, a shift occurred. In November 2023, the average house price in London stood at £505,283, representing a significant drop of 6.95% from the previous year.

THis decline can be attributed to several factors, including the end of the Stamp Duty Holiday, which removed a key incentive for buyers and changes in work-from-home policies that might have influenced location preferences. 

2024 Market dynamics

Moving in 2024, the London UK housing market continues to evolve under the influence of the pandemic. The conclusion of the Stamp Duty holiday has had lingering effects, while changes in work-from-home policies have potentially altered long-term housing preferences.

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How Coronavirus affected UK house prices

The advent of COVID-19 and subsequent lockdowns ushered in a period of significant fluctuations within the UK housing market. This overview chronicles the trajectory of these changes:

Initial Impact of Lockdown:

In early 2020, the first COVID-19 lockdown brought about a marked slowdown in the housing market, mirroring the impact on various other sectors. Physical viewings were halted, and the resultant uncertainty led to a decline in market activity and a stalling of house price growth.

This period within the London UK housing market  was characterised by a wait-and-see approach from both buyers and sellers, as the future of the market and the broader economy seemed uncertain.

Post-Lockdown Recovery and Surge:

After the initial lockdown period, the London UK housing market experienced a robust recovery and an unprecedented surge, driven by multiple factors:

  • Pent-up Demand: The lockdown led to a buildup of pent-up demand, as many potential buyers had postponed their purchase plans. Once restrictions eased, this accumulated demand was unleashed, leading to a spike in housing transactions.

  • Stamp Duty Holiday: The UK government’s introduction of a Stamp Duty Land Tax holiday served as a substantial incentive, stimulating a flurry of activity in the property market. This policy, aimed at bolstering the market amidst the pandemic, reduced the cost of purchasing homes, thereby attracting a wave of buyers.

  • Shift in Housing Preferences: The pandemic fundamentally altered housing preferences. The increase in remote working and more time spent at home led to a growing demand for properties with additional space, home offices, and access to green areas. This shift was especially pronounced in suburban areas and on the outskirts of cities, including London, where there was a notable surge in demand for properties offering these features.

  • Economic Support Measures: In addition to the Stamp Duty holiday, various economic measures such as furlough schemes and financial support for self-employed individuals played a critical role in cushioning the market against a more severe downturn. These measures maintained consumer spending power and confidence, indirectly supporting the housing sector.

  • Lower Interest Rates: The Bank of England's decision to reduce interest rates to historic lows was a pivotal move to stimulate the economy. Lower interest rates made borrowing more affordable, particularly for mortgages, thus giving a significant boost to the housing market. This policy facilitated a higher level of borrowing and investing in property, contributing to the market's resilience.

Later Stages and Market Adjustments:

As the Stamp Duty holiday concluded and the immediate impacts of the pandemic began to wane, the housing market started to exhibit signs of cooling in certain areas. 

This phase marked a gradual return to pre-pandemic market conditions but with lasting changes in buyer preferences and housing trends. The cooling off period highlighted the market's adjustment to a new normal, balancing out the initial surge in activity.

Regional Variations

It's important to note that the impact of the pandemic on house prices was not uniform across the UK. Different regions experienced varying levels of demand and price changes, influenced by local factors such as employment rates, the prevalence of remote working, and urban vs. rural appeal. 

During and after the pandemic, the London UK housing market experienced significant price changes, varying greatly by area:

Dramatic Price Drops in Exclusive Areas:
  • Mayfair and St James's (W1J Postcode): The most dramatic drop was observed in the W1J postcode, covering Mayfair and St James's, where prices plummeted by 40%, falling from £4.9 million to £2.9 million.

  • Kensington (W8 Postcode): Kensington's W8 postcode saw the second-largest decline with an 18% drop.

  • Knightsbridge and Belgravia (SW1X), Mayfair and St James's (W1S), and Belgravia (SW1W): These areas experienced drops of 17%, 15%, and 11% respectively​​.

Areas with Notable Price Increases:
  • St James's (SW1Y Postcode): In stark contrast, the SW1Y postcode area in St James's witnessed a substantial increase of 54% during the pandemic.

  • Chelsea (SW3 and SW10 Postcodes): Chelsea's SW3 and SW10 postcodes recorded price increases of 23% and 12% respectively.

  • Mayfair (W1K Postcode) and South Kensington (SW7 Postcode): Properties in W1K (Mayfair) and SW7 (South Kensington) saw prices rise by 6% and 3% respectively​​.

These fluctuations highlight the varied impact of the pandemic on the London UK property market, with certain high-end areas experiencing significant drops in property values, while others, particularly those offering more space and green areas, saw increases.

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Does Covid still affect London house prices

While the acute phase of the COVID-19 pandemic has passed, its influence on the London UK housing market continues in various forms, from changes in buyer preferences to broader economic impacts.

  • Change in Buyer Preferences: One of the most lasting impacts of COVID-19 has been the change in buyer preferences. The pandemic led to a greater demand for properties with more space, home offices, and access to outdoor areas. This shift continues to influence the market, particularly in areas of London that can offer these amenities.

  • Economic Factors: The economic fallout from the pandemic, such as fluctuations in employment rates and economic uncertainty, continues to affect buyer confidence and, consequently, the housing market. While the immediate economic impact of COVID-19 may have lessened, its longer-term effects on the economy still play a role in housing market dynamics.

  • Interest Rates and Mortgage Availability: The Bank of England's response to the pandemic, including adjusting interest rates, continues to affect mortgage affordability. While rates were at historic lows during the height of the pandemic, any changes to these rates can impact buyer affordability and influence house prices.

  • Remote Working Trends: The pandemic accelerated the trend towards remote working, which has had a lasting effect on where people choose to live. Areas of London that offer a balance between connectivity to the city centre and more living space may continue to be in higher demand.

  • Global Mobility and Investment: Travel restrictions during the pandemic significantly reduced foreign investment in London's property market, particularly in prime central areas. As global mobility resumes, there may be a resurgence in this market segment, potentially affecting prices in these areas.

  • Supply Chain Issues and New Developments: The pandemic caused disruptions in supply chains, affecting the construction sector and the pace of new housing developments. Any ongoing supply chain issues or delays in new developments could impact the availability of housing and, in turn, house prices.

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Struggling to sell your London home after lockdown?

The post-lockdown era has brought about unique challenges for those looking to sell their properties in the London UK housing market. One significant change has been the surge in activity among estate agents. The easing of lockdown restrictions unleashed a backlog of properties onto the market, leading to an unprecedented level of activity.

Estate agents are now busier than ever, navigating through a sea of listings, each vying for the attention of potential buyers. This surge has led to a saturated market, making it increasingly challenging for individual sellers to stand out and successfully sell their properties.

This saturation can particularly affected sellers in two ways:

  • Market visibility: With an overwhelming number of properties listed, gaining visibility in such a crowded market becomes a daunting task. Sellers might find their properties lost in a myriad of listings, struggling to capture the interest of buyers. 

  • Sales process delays: The sheer volume of transactions estate agents are handling can lead to delays in the sales process. From listing to completing deals, every step may take longer than usual, extending the time your property stays on the market. 

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Whether you’re looking to relocate quickly, avoid the uncertainties of the open market, or simply want a straightforward sale, our service is tailored to meet your needs in this dynamic post-lockdown market. 

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Mathew McCorry

If you read my property blog now, that'll be the end of it. I will not look for you, I will not pursue you. But if you don't, I will look for you, I will find you and I will make you read it.