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Central London leads housing market slowdown

London house prices are likely to continue to underperform even if the shift in buyer demand away from the capital due to remote working ends. More stretched house prices in the capital prior to the jump in mortgage rates means the impact of higher borrowing costs on demand will be most acute there. Indeed, the cost of a mortgage on the average London home has jumped from 40% of a typical FTB household’s income a year ago to almost two thirds. So, while inflation in London house prices never reached double figures in 2021-22 as it did in the rest of the country, it has been first to cool with prices already falling year-over-year in some central and prime boroughs. We anticipate a 12% peak-to-trough fall in prices nationally, but in London we expect a drop of at least 15%.

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