Marginal rise for London house prices while North-South growth gap widens
04-29-2025
Affordability constraints and increased supply mean the average London home value has increased by 0.7 per cent to £534,200
London Standard Charlotte Duck
House price growth across London and the South of England was eclipsed by gains made in the North, last month. In the year to March, the capital saw a 0.7 per cent increase in property prices, making the average London home £534,200, according to a new house price index by Zoopla.
Homes in the South East performed the worst nationally, up just 0.3 per cent, while East and South West areas only fared slightly better with a 0.8 per cent uptick. In contrast, the North saw healthy growth; in Northern Ireland, properties have increased six per cent, while the North West and Scotland had a three per cent and 2.7 per cent boost to prices respectively. The UK average was 1.6 per cent, compared to 1.9 per cent at the end of 2024, but this figure is expected to slow to between one and 1.5 per cent across the country over the next few months.
This North-South growth gap is partly because the house-price-to-income ratio is so much higher in London and the Home Counties. “Affordability pressures from high house prices, compared to the rest of the country and the hangover from the ending of stamp duty reliefs have impacted price growth over recent months. Sales agreed continues to increase, which shows there is demand for homes in the capital, but sellers need to speak to an agent when it comes to setting realistic prices that will achieve a sale,” says Richard Donnell, Executive Director at Zoopla.
Increased Supply
Another reason for this cooling in demand is the increasing number of homes for sale. Across the country, there are 12 per cent more properties on the market than there was a year ago, with estate agents having an average of 34 properties on their books, over double they had during the pandemic boom of 2022, when the average was 15.
The result is that buyers have more choice and are aware that they can hold out for a good deal rather than pay an inflated price. While it might mute price growth, this increased supply means that there’s been more activity in the market, and sales agreed are up six per cent year-on-year, with buyer demand also outgrowing last year’s figure by one per cent.
House price growth is expected to slow further over the coming months as the economic outlook remains uncertain, particularly the impact of US tariffs. But there are signs that buying powers may increase as mortgage lenders re-assess their affordability criteria. Some have started to adjust how they test the ability of buyers to afford higher mortgage rates, which will boost what they can borrow, supporting demand and market activity over the rest of the year.
“One of the biggest supporters of continued market activity lies with mortgage lenders. Revisions to how lenders are assessing mortgage affordability will unlock additional buying power and support sales volumes to help tackle the healthy stock of homes for sale,” says Donnell. “While the average five-year fixed rate mortgage is around 4.5 per cent today, many lenders are currently ‘stress testing’ affordability at eight to nine per cent. This makes it harder to secure a mortgage without a large deposit. If average mortgage stress rates were to return to pre-2022 levels of 6.5 per cent to seven per cent, this would deliver a 15-20 per cent boost to buying power.” But it’s expected that this boost would help clear the homes currently for sale rather than increasing house prices.
London growth flatlining
At a local level, the muted house price growth in London is obvious — there’s less than three per cent between the top and bottom-performing borough. Redbridge and Barking & Dagenham have seen the biggest increase in house prices — both at 1.6 per cent. Redbridge, where the average property costs £471,100, includes Wanstead and South Woodford where Central line links appeal to east and north-east London homehunters. The Elizabeth Line also runs through this borough. Neighbouring Barking & Dagenham is an area designated as a national priority for urban regeneration, and includes three underground lines and the London Overground. The average property price here is £336,500. The borough of Sutton saw house prices increase 1.4 per cent to an average of £443,200 in March. This south London borough was once described as the most “normal place in Britain” and regularly appears in polls of the best places to live in London.
At the other end of the scale, Hillingdon, the second largest and most westerly borough, saw a 1.3 per cent drop in house prices, to an average of £453,300, an annual fall that equates to £6,180. Here you’ll find Heathrow Airport, Brunei University and the towns of Ruislip and Uxbridge. The second biggest faller was the City of Westminster where house prices dropped 1.1 per cent to an average of £948,200. This inner London borough might be a tourist trap, but it’s suffered from the increased number of non-domiciles exiting the capital. The third-biggest faller was also the most expensive. In Kensington & Chelsea, the average property price is £1,147,200 but that’s a 0.8 per cent annual fall. Again, this can partly be explained by the dip in prime central London.
“House price inflation across London's boroughs is split equally between areas with modest price falls and price increases. Annual growth ranges from 1.6 per cent in Redbridge and Barking and Dagenham to price falls of over one per cent in a year in the City of Westminster and Hillingdon,” adds Donnell.
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