House prices in the most upmarket parts of London dropped significantly in the past year as speculation about what property taxes Chancellor Rachel Reeves would introduce weighed heavily on homeowners.
In Kensington and Chelsea, one of the most upmarket parts of the city, prices fell by £236,000, or 16.5 per cent, from £1,431,068 to £1,194,726 in October compared with the same month a year earlier. House prices also fell in the south-west of England by 1.3 per cent on average. Combined with a cut in interest rates, this opens up opportunities for buyers.
The average price across the UK capital dropped 2.4 per cent to £547,468, the fastest fall in two years, as speculation mounted over what the Chancellor would introduce in her budget in November.
Ultimately, she opted against introducing a wealth tax or exit tax, but did introduce an annual levy on homes worth more than £2 million. This has been called a mansion tax, though many properties in the city at that value are typical terraced or semi-detached suburban homes.
Meanwhile, across the UK, annual house price growth slowed in October to reach 1.7 per cent, down from 2.0 per cent in September, according to official figures. Across the UK, the average house price in October was £270,000, the Office for National Statistics (ONS) said.
Property values increased to reach £292,000 (a 1.4 per cent annual increase) on average in England in October, £211,000 (1.5 per cent) in Wales, and £192,000 (3.3 per cent) in Scotland. The average house price in Northern Ireland in the third quarter of 2025 was £193,000 – a 7.1 per cent annual increase.
Within England, the north-east had the highest annual house price inflation in October, at 5 per cent.
Within London, the City saw the largest percentage fall at 18.1 per cent to £607,000, while Westminster also dropped heavily, 16.1 per cent down to £890,000. At the other end of the scale, the boroughs of Havering, Bromley, Lewisham and Waltham Forest all had rises of 4 per cent or above.
Amy Reynolds, head of sales at London estate agency Antony Roberts, said: “In London, where affordability and sentiment are highly rate-sensitive, even small shifts in expectations can have an outsize impact on activity.”
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “When house prices fall it affects wannabe downsizers who are relying on the equity in the home to supplement their retirement income. It also dents the confidence of homeowners, who feel less well off, and may hold back on spending as a result.
“Given how sluggish economic growth is right now, this could spell more bad news for the economy. The only people likely to be celebrating are those moving up the property ladder and first-time buyers.”
The figures were released as the ONS said the rate of Consumer Prices Index (CPI) inflation slowed to 3.2 per cent in November, from 3.6 per cent in October. It is the lowest CPI rate since March and a bigger slowdown in inflation than many economists had been expecting.
The Bank of England announced a 0.25 percentage point cut to the base rate on Thursday, down to 3.75 per cent.
Nick Leeming, chairman of the estate agency Jackson-Stops, said: “As we edge into the new year, it is important for sellers to continue to price competitively. This is a precision market, with regional nuances and supply dynamics varying widely between postcodes, putting emphasis on sellers to read it correctly.”
On the lowering of the bank rate, he said: “This is the window buyers have been waiting for – choice, leverage and stability finally back on their side. Already in the first few weeks of December, we have seen a sharp uptick in offers and exchanges, with a continued surge in activity expected in the first quarter of the year.”
The ONS also said average UK monthly private rents increased by 4.4 per cent annually to reach £1,366 in November. The annual growth rate slowed from 5 per cent in the 12 months to October.
Nathan Emerson, chief executive of property professionals’ body Propertymark, said an “unhealthy imbalance between rental supply and demand” contributes to rental prices edging upwards.
