Good property news for everyone – less so, London

One thing that seems to always have been true, is the allure of our capital city’s real estate and how it outpaced the rest of the country. Apart from the odd blip, London has always been that best street to buy the worst house on – but the latest figures show that we may well be in one of those blips, or something worse.

Across the country, prices have shot up, nearing old records and building is booming – but in the three months leading up to September, the number of offers made by prime property buyers in London fell 10% below the five-year average, according to data from Knight Frank. This decline comes amid uncertainties surrounding potential tax increases expected in the upcoming Autumn Budget.

In the ultra-high-end market, with properties priced above £10 million, transactions saw a significant drop of 22% in the year leading up to July, based on Knight Frank’s figures.

Tom Bill, Knight Frank's Head of UK Residential Research, noted that the current uncertainty is preventing the expected boost in demand and transactions, despite recent declines in mortgage rates. “Lower mortgage rates are not sparking the sort of rise in demand and transactions that might be expected,” he says.

Read more: What’s wrong with London house prices?

There may be some optimism ahead, with speculation suggesting the Government could revise its proposals for non-domiciled (non-dom) individuals in the upcoming Budget. Media reports hint that policymakers might adjust or expand their tax plans, recognising that many non-doms might accept higher taxes as long as their global income remains protected.

“We don’t know what the government will eventually do in this month’s Budget, but it appears to be asking the right questions,” Bill said. “Any reversal of the recent decline in investor confidence would certainly help drive activity in prime London property markets.”

According to Knight Frank, average prices in prime central London (PCL) have fallen by 18% since their peak in mid-2015. Bill suggests that a period of price growth is overdue, stating that some buyers may closely monitor the Budget for indications of when this growth could begin. “There will no doubt be buyers who will be watching the Budget closely for a sign of how quickly it may materialise,” he added.

Read more: Will Rachel Reeves drive up mortgage rates?

Over the past year, PCL prices have decreased by 2.1%, marking the 17th consecutive month of annual price decline. However, the situation is more favourable in Prime Outer London (POL), where prices are largely influenced by domestic and needs-based buyers. In POL, prices are 7.3% below their mid-2016 peak but have shown a modest 0.5% increase in the year leading up to September. This was the highest growth rate in POL since May 2023, attributed to lower borrowing costs during the summer.

Bill also highlighted that the reliance on needs-based buyers has led to better performance in areas like south-west London, which has seen more offers and exchanges compared to prime central London since the beginning of the year. He concluded, “How long this pattern continues will depend on the content of this month’s Budget.”

The most expensive streets in London, ranked by average property prices:

1. Kensington Palace Gardens, W8 - Known as "Billionaire's Row," this is the priciest street in London and the UK, with average house prices around £42.6 million.
2. The Boltons, SW10 - Located in Chelsea, properties here average £30.3 million.
3. Grosvenor Crescent, SW1X - In Belgravia, this street has average prices of approximately £22.8 million.
4. Courtenay Avenue, N6 - Near Highgate, properties average £16.8 million.
5. Ilchester Place, W14 - Situated in Holland Park, homes here cost around £13.7 million on average.
6. Compton Avenue, N6 - Also near Highgate, this street averages £12 million per property.
7. Manresa Road, SW3 - In Chelsea, properties have an average price of £11.6 million.
8. Cottesmore Gardens, W8 - Another high-value street in Kensington with homes averaging £11 million.
9. Frognal Way, NW3 - Located in Hampstead, properties here average £10.7 million.
10. Chester Square, SW1X - Situated in Belgravia, homes have an average price of £10.4 million.