How expensive are homes in London now?

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How much does the average London home cost now?

A London home currently costs about £554,000 on the latest completed-sale measure, almost twice the average price across England.

HM Land Registry puts the average London transaction at £553,870, compared with £293,262 across England. That gives London a premium of roughly £261,000, or 89%, before we even get into the most expensive parts of the capital.

You will also see much higher numbers online. Rightmove currently puts the average asking price of a newly listed London property at £646,451. That does not mean London homes suddenly cost £90,000 more than the Land Registry suggests. Rightmove measures what sellers ask for at the start of the process, while the official index measures completed transactions.

These days that distinction is particularly important. Rightmove says London asking prices are 3.1% below a year ago and sellers are taking an average of 73 days to find a buyer. Buyers therefore have more reason to negotiate than the £646,000 headline alone suggests.

For a realistic citywide benchmark, we would use roughly £550,000. For an actual buyer, though, property type and location matter so much that the London average quickly becomes too crude.

Are London house prices falling right now?

Yes. London house prices are currently falling year on year, and several independent datasets now agree that the capital is weaker than most of Britain.

The latest Land Registry index shows London prices down 2.5% from a year earlier. London has recorded an annual decline for ten consecutive months and was the weakest English region in the latest official release.

Zoopla's newer market reading points in the same direction. Its latest index has London prices 1% below a year ago while prices are still rising 3.1% in the North West and 1.7% in Yorkshire and the Humber. Rightmove is seeing even more weakness at the listing stage, with London asking prices down 3.1% year on year.

The pattern is broader than one negative percentage. Completed prices, Zoopla's market measure and asking prices are all weak at the same time.

Buyers have gained some leverage as well. Zoopla says there are 5% more homes for sale nationally than a year ago, while agreed sales are still 6% lower. Rightmove's 73-day selling period in London also shows that sellers cannot assume a quick sale at almost any price.

We would still stop well short of calling this a London property crash. The official index actually rose 1% in its latest monthly reading. Prices are drifting down from a very high base rather than collapsing.

How much does a London flat or house actually cost?

A London flat currently averages about £431,000, while a detached house costs more than £1.16 million, so the type of home can change the answer by more than £700,000.

Terraced houses average about £641,000 and semi-detached homes roughly £722,000. These are much more useful numbers than the citywide average if someone already knows what sort of property they want.

There is another interesting difference. Flats are taking most of the recent price pressure. Land Registry data show London flat and maisonette prices down 4.7% year on year. Terraces are almost flat at -0.3%, semi-detached homes are up 0.6%, and detached homes are down just 0.7%.

That gap is revealing. Buyers have become more price-sensitive in the part of the market dominated by apartments, leaseholds, service charges and many first-time buyers. Family houses remain much harder to replace and have held their value better.

So someone saying "London prices are down" is much more likely to feel that correction while shopping for a flat than while chasing a good family house.

How much cheaper is outer London than central London?

Outer London can currently be hundreds of thousands of pounds cheaper than central London, and the gap between boroughs is large enough to make the idea of one London property market almost meaningless.

Barking and Dagenham, the cheapest borough in the latest Land Registry data, averages about £371,000. Croydon is around £395,000, Bexley £405,000 and Newham £403,000.

Move west or into wealthier inner districts and prices jump quickly. Wandsworth averages roughly £680,000, Richmond upon Thames £819,000 and Camden £833,000. Kensington and Chelsea sits at about £1.25 million.

That makes the most expensive borough around 3.4 times as expensive as the cheapest one. In cash terms, the difference between the two averages is close to £880,000.

Even borough averages hide another layer of variation. ONS neighbourhood data have previously put the median sale price around Knightsbridge, Belgravia and Hyde Park at £3.6 million. A buyer looking in that part of London is barely participating in the same market as someone searching in Barking.

Are expensive central London homes getting cheaper faster?

Yes. Some of London's most expensive boroughs are currently falling much faster than the cheaper outer parts of the city.

The pattern in the latest official borough data is striking. Camden is down 7.1% year on year, Hammersmith and Fulham 13.3%, Tower Hamlets 13.1% and Kensington and Chelsea 14.7%. Westminster shows an even larger 25.4% fall in its average transaction price.

We should be careful with the most dramatic central-London percentages. High-value boroughs record fewer transactions, and the mix of homes sold can move their average sharply. Westminster selling fewer ultra-prime properties one year, for example, can pull down the borough average without every individual flat losing a quarter of its value.

Even with that caveat, the wider pattern survives. Several expensive boroughs are falling while cheaper outer areas are flat or rising.

Central London has therefore become cheaper relative to some outer districts lately, although the starting gap was so large that "cheaper" still means very expensive in absolute terms.

What does a first-time buyer pay for a London home now?

A London first-time buyer currently pays about £472,000 on average, which puts a supposedly starter purchase surprisingly close to half a million pounds.

That is only around £82,000 below the average price paid across all London buyers. It also tells us why first-time buying in the capital increasingly depends on a large deposit, two incomes, family help or some combination of the three.

Location changes the picture dramatically. The latest Land Registry data put the average first-time purchase at about £354,000 in Bexley and roughly £482,000 in Lambeth. Camden reaches around £729,000 and Westminster about £766,000.

There is also a tax problem around the £500,000 mark. First-time buyers currently pay no stamp duty on the first £300,000 and 5% on the portion between £300,000 and £500,000. Once the purchase exceeds £500,000, the first-time-buyer relief disappears.

Zoopla recently looked at actual buyer enquiries and found that nearly eight in ten London first-time buyers are now paying stamp duty. Across northern England, fewer than one in ten do.

That comparison says more about London's entry cost than the house-price average alone. Even people at the beginning of the ownership ladder are routinely reaching price levels that trigger a property tax designed to spare cheaper first purchases.

Is £500,000 enough to buy a home in London today?

Yes. £500,000 is still a serious London property budget today, but it mainly buys flats and homes in cheaper outer boroughs rather than a typical London family house.

The average London flat sits below that budget at roughly £431,000. The average terrace, however, is around £641,000, leaving a £141,000 gap. Semi-detached homes are further away again at roughly £722,000.

Geography helps. £500,000 sits above the current borough averages in places including Barking and Dagenham, Croydon, Bexley, Newham, Sutton, Greenwich, Enfield, Hillingdon and Redbridge.

It becomes much tighter once the search moves towards more expensive inner and western neighbourhoods. Waltham Forest is already above £520,000 on average, Brent above £540,000 and Ealing around £576,000.

A half-million-pound budget therefore gives buyers real choice across London, just not every kind of choice. Anyone expecting a good family house in a popular inner borough will usually need considerably more. Someone happy with a flat or an outer-London location has a much wider search.

Are London homes still unaffordable compared with salaries?

Yes. London is currently the least affordable English region relative to local earnings, with the average home costing 10.6 times average annual pay.

The ONS considers a home broadly affordable when it costs no more than five times annual earnings. London is more than twice that level.

Another ONS calculation makes the gap easier to picture. Even if a London buyer had access to five years of average earnings, they would still need another £279,000 to reach the price of the average home. In the North East, five times average earnings is enough to reach the regional average price.

There has been some improvement from the worst point of the affordability squeeze because earnings have risen while London house prices have stagnated or fallen. The improvement is real, but the gap remains enormous.

Kensington and Chelsea shows how extreme London can become. Its house-price-to-earnings ratio reached 25.2 in the latest ONS affordability data.

At ratios like these, salaries alone cannot explain who buys. Existing housing equity, inherited wealth, high dual incomes and outside capital become much more important parts of the London ownership story.

Are falling London prices actually making homes easier to afford?

Only a little. London house prices are softer now, but higher mortgage rates have recently taken back much of the affordability improvement for buyers who need to borrow.

The newest Bank of England data show the effective rate actually paid on newly drawn mortgages rising from 4.08% in April to 4.22% in May, 4.35% in June and 4.45% in July.

Zoopla reaches the same problem from the buyer's side. Average five-year fixed mortgage rates moved from below 4% at the beginning of the year to around 4.8% in its latest analysis. Zoopla estimates that this has cut mortgage buying power by roughly 9%.

The London impact is larger because the loans themselves are larger. Zoopla calculates that a London buyer would need to find about £35,500 more through extra deposit or borrowing capacity to keep the same monthly mortgage payment as at the start of the year. The national figure is roughly £18,200.

So the recent fall in London property prices helps a cash buyer more cleanly than it helps someone taking a large mortgage. For many ordinary buyers, the lower purchase price is arriving alongside a more expensive loan.

What would the mortgage on a typical London home cost now?

A buyer financing a typical London home with a 20% deposit would currently be looking at a mortgage payment of roughly £2,230 a month before any other housing costs.

Using a £554,000 purchase price, a 20% deposit comes to about £111,000 and leaves roughly £443,000 to borrow. At the Bank of England's latest 4.45% effective rate for newly drawn mortgages, a 30-year repayment loan works out at around £2,230 per month.

A typical London flat produces a much smaller but still substantial bill. With 20% down on £431,000, the mortgage would be roughly £345,000 and the monthly payment around £1,740.

Move up to the average terraced house and the payment reaches roughly £2,580 a month with the same assumptions.

First-time buyers can face an awkward combination of a smaller deposit and a large purchase price. Putting 10% down on the average £472,000 first purchase leaves about £425,000 borrowed, which would mean roughly £2,140 a month at 4.45%. In reality, a 90% loan-to-value mortgage may carry a higher rate than that average.

None of these calculations includes service charges, insurance, maintenance, council tax or utilities. For leasehold flats in particular, the mortgage can be only one part of the monthly housing bill.

How much cash do you need before buying a London home?

Buying a London home now often requires well over £100,000 in upfront cash once the deposit and stamp duty are combined.

Take a £500,000 property. A buyer putting down 20% needs a £100,000 deposit. A qualifying first-time buyer would also owe £10,000 in stamp duty, taking the initial total to £110,000 before solicitor fees, surveys and moving costs.

Someone who has bought before pays the ordinary SDLT rates. On a £554,000 purchase, the tax comes to roughly £17,700. Combine that with a 20% deposit and the upfront requirement reaches around £128,500.

At £641,000, around the current price of an average London terrace, standard stamp duty rises to roughly £22,050. A 20% deposit adds £128,200, putting the combined amount just over £150,000.

The numbers get harsher for investors and second-home buyers. Current rules add five percentage points to the normal SDLT bands for an additional residential property. Buyers classed as non-UK residents for SDLT can also face another two-percentage-point surcharge.

This is one reason London's headline house price understates the difficulty of actually getting into the market. A household can earn enough to service a mortgage and still spend years trying to assemble the cash needed to complete the purchase.

Are London's cheapest boroughs actually cheap?

No. Even London's cheapest boroughs remain expensive when we compare them with the rest of England.

Barking and Dagenham currently averages about £371,000. The England average is roughly £293,000, so London's cheapest borough still carries a premium of about £78,000, or 27%.

Croydon is around £395,000, about 35% above the English average. Newham at roughly £403,000 is close to 37% higher, while Bexley's £405,000 average is around 38% higher.

That puts London's geography into perspective. Moving from Kensington and Chelsea to Barking and Dagenham can cut the average purchase price by almost £880,000. Yet the cheaper end of London never really converges with cheap housing nationally.

This is why the phrase "affordable London borough" needs some care. It usually means affordable relative to other parts of London. For a buyer comparing the capital with cities in northern England, Wales or parts of the Midlands, even London's lower-priced districts can look expensive.

So how expensive are homes in London now?

London homes are still extremely expensive today, even though the market has finally started to move in buyers' favour.

The broad completed-sale benchmark sits around £550,000, almost 90% above England. But that average hides the part of the story buyers actually experience: roughly £431,000 for a flat, more than £640,000 for a terrace, and anything from around £371,000 in the cheapest borough to £1.25 million in Kensington and Chelsea.

Affordability is the harder verdict. London homes cost 10.6 times average earnings, the highest regional ratio in England. Nearly eight in ten London first-time buyers now pay stamp duty, and recent mortgage-rate increases have reduced the amount buyers can borrow for the same monthly payment.

The market itself has softened. As we saw above, official London prices have been falling year on year for months, Zoopla also records a decline, and Rightmove is seeing lower asking prices and longer selling times. Buyers therefore have more bargaining power than they did in a rising market.

But London's affordability problem has not disappeared with a few percentage points of price decline. A £500,000 budget still mainly points towards flats and cheaper outer boroughs, while buying a typical family house can easily require £600,000 to £700,000 or more.

Our conclusion is simple: London is cheaper than it was recently, but it is still extraordinarily expensive. Buyers are finally getting some help from weaker prices, more choice and sellers who have to negotiate, while high mortgage costs and huge upfront cash requirements keep home ownership out of reach for many London households.

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INVESTROPA

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