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London property prices are rising again as we reach mid-2025, with the residential market showing a 2.3% annual increase to reach an average of £564,000.
After a challenging period in 2023, the London property market has returned to growth, driven by recent interest rate cuts, renewed investor confidence, and supportive government policies aimed at boosting housing supply.
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London residential property prices have increased by 2.3% over the past year to January 2025, with the average property now costing £564,000.
Semi-detached and terraced houses are leading the growth at 4.4% and 4.0% respectively, while flats have seen minimal increases of just 0.7%.
| Indicator | Current Value | Trend |
|---|---|---|
| Average London property price | £564,000 | ↑ 2.3% annually |
| Bank of England base rate | 4.25% | ↓ First cut in years |
| 5-year price forecast | +18-21% | Moderate growth expected |
| Fastest growing areas | Hackney, Victoria Park | ↑ 6.3%, 5.1% respectively |
| Investment activity | 17% rise in inquiries | ↑ Both domestic & foreign |
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
What is the current average property price in London as of June 2025?
The average residential property price in London stands at £564,000 as of early 2025.
This figure represents all property types combined, but there's significant variation across different categories. Detached houses command the highest prices at £1,147,000, while flats and maisonettes are more affordable at £449,000 on average.
The London residential market shows a clear hierarchy in pricing, with semi-detached properties averaging £714,000 and terraced houses at £638,000. These price differentials reflect both the scarcity of larger properties in London and the continued demand for family homes with outdoor space.
Prime Central London areas including Mayfair, Belgravia, and Knightsbridge maintain significantly higher price points than the London average, often exceeding £2 million for prime properties.
As we reach mid-2025, these prices represent a moderate recovery from the market slowdown experienced in 2023.
How much have London property prices increased in the last 12 months?
London residential property prices have increased by 2.3% over the past year to January 2025.
This growth marks a significant turnaround from the stagnation and minor declines experienced throughout 2023. The recovery has been uneven across property types, with houses significantly outperforming apartments in terms of price appreciation.
Semi-detached and terraced houses have led the charge with impressive gains of 4.4% and 4.0% respectively, while detached properties rose by 2.9%. In stark contrast, flats and maisonettes barely moved, recording just 0.7% growth over the same period.
The disparity between house and flat prices reflects changing buyer preferences post-pandemic, with many seeking more space and private outdoor areas. This trend has been particularly pronounced in outer London boroughs where houses are more prevalent.
It's something we develop in our UK property pack.
Which London areas are seeing the fastest property price growth in 2025?
Hackney leads London's property price growth with an impressive 6.3% annual increase.
Several other boroughs are significantly outperforming the London average of 2.3%. Victoria Park has recorded 5.1% growth, while Bexley, an outer London borough, matches this performance, demonstrating that growth isn't limited to central areas.
| Borough/Area | Annual Price Growth | Key Driver |
|---|---|---|
| Hackney | 6.3% | Strong house sales, creative hub |
| Victoria Park | 5.1% | Green spaces, transport links |
| Bexley | 5.1% | Affordability, family appeal |
| Wandsworth | 2.9% | Riverside development, schools |
| Prime Central London | 2.5% | International demand returning |
Prime Central London districts are also showing renewed vigor, with areas like Mayfair, Belgravia, and Chelsea expected to outpace other prime UK markets over the coming years despite recent price softness.
The strongest growth is occurring in areas that combine good transport links, green spaces, and relative affordability compared to central London's premium districts.
What are the property price forecasts for London in 2026 and beyond?
London property prices are forecast to rise by 18-21% cumulatively over the five years to 2029.
Specifically for 2026, analysts predict annual growth of approximately 3.5-4%, representing an acceleration from current levels as interest rates continue to normalize and buyer confidence strengthens. This would bring the average London property price to around £585,000 by the end of 2026.
Prime Central London is expected to see a cumulative price rise of 19.2% over the five-year period, slightly below the broader London average but still representing substantial gains given the high base prices in these areas.
For the longer term spanning 10-20 years, most analysts expect continued growth underpinned by London's chronic housing supply shortage, strong international demand, and the capital's enduring status as a global financial center. However, growth rates may moderate as affordability constraints and potential regulatory changes take effect.
The forecast assumes continued economic stability and further Bank of England rate cuts through 2025 and 2026.
Which property types are experiencing the biggest price increases in London?
Semi-detached and terraced houses are leading London's property price recovery with annual gains of 4.4% and 4.0% respectively.
This represents a dramatic shift in market dynamics, as houses significantly outperform flats which have seen minimal growth of just 0.7%. In prime London districts, the gap is even more pronounced, with houses rising 5.3% compared to just 1.3% for flats.
Detached properties, while seeing more modest growth at 2.9%, maintain their position as the most expensive property type at an average of £1,147,000. The strong performance of family homes reflects lasting changes in buyer preferences following the pandemic.
The underperformance of flats is particularly notable given they traditionally formed the backbone of London's property market. This trend is creating opportunities for flat buyers but challenges for investors heavily weighted toward apartment portfolios.
Market experts expect this divergence to continue through 2025 and into 2026 as hybrid working patterns persist.
How do current London property prices compare to five years ago?
London property prices have increased by over 27.6% in the past decade, though growth over the last five years has been more modest.
Looking specifically at the five-year period from 2020 to 2025, London's property market has experienced significant volatility. The pandemic initially drove rapid price growth, with some areas seeing double-digit annual increases in 2021 and 2022.
However, this was followed by a sharp slowdown in 2023 as interest rates rose dramatically, with some London boroughs experiencing slight price declines. The current recovery in 2025 represents a return to more sustainable growth patterns.
Compared to other UK regions, London's five-year performance has lagged behind northern cities like Manchester and Liverpool, which saw stronger percentage gains from lower base prices. Yet in absolute terms, London property values have still added approximately £125,000 to the average home over this period.
It's something we develop in our UK property pack.
What are property market experts saying about London prices in mid-2025?
Property market analysts are "cautiously optimistic" about London's prospects for the remainder of 2025 and into 2026.
The consensus view among major property consultancies and financial institutions is that the market has turned a corner following the Bank of England's rate cut to 4.25% in May 2025. This monetary policy shift is seen as a crucial catalyst for renewed market activity.
Experts point to several positive indicators including a 17% year-on-year rise in property inquiries and a 12% increase in housing stock availability, suggesting both demand and supply are improving. The return of international investors, particularly to prime London markets, is also cited as a key driver.
However, analysts caution that growth will likely remain moderate rather than explosive, constrained by affordability challenges and the need for sustainable price appreciation. Most expect annual growth in the 3-5% range through 2026, barring any major economic shocks.
The market is described as "resilient" rather than "booming," with fundamentals supporting steady appreciation.
How are Bank of England interest rates affecting London property prices in 2025?
The Bank of England's reduction of the base rate to 4.25% in May 2025 has provided a significant boost to London's property market.
This first rate cut in years has translated directly into lower mortgage rates, with average two-year fixed rates falling below 5% for the first time since 2022. The improved affordability has unlocked pent-up demand from buyers who had been waiting on the sidelines during the high-rate environment of 2023-2024.
Transaction volumes in London have increased by approximately 15% since the rate cut, with first-time buyers particularly active as monthly mortgage payments become more manageable. The psychological impact has been equally important, restoring confidence that the worst of the rate hiking cycle is behind us.
Further rate cuts are anticipated if inflation continues to fall toward the Bank's 2% target, which would provide additional stimulus to property prices. Market participants expect the base rate to reach 3.75% by the end of 2025, supporting continued price growth.
Mortgage lenders are already pricing in these expected cuts, offering increasingly competitive deals.
What impact has the 2024 UK election had on London property prices?
The 2024 general election, which resulted in a Labour government, has brought renewed focus on housing delivery and planning reform in London.
Market activity surged around the election period as buyers acted in anticipation of policy changes and potential interest rate cuts. Labour's ambitious target of building 1.5 million homes over five years, with a significant portion in London and the Southeast, has been generally welcomed by the property industry.
The new government's planning reforms, aimed at streamlining the development process and releasing more land for housing, are expected to have positive long-term impacts on supply. However, immediate effects on prices have been moderate, with the market more influenced by interest rate movements than political changes.
First-time buyer support measures announced by the new government, including enhanced Help to Buy schemes for London, have provided additional demand-side stimulus. These policies are particularly important given London's acute affordability challenges.
Overall, the election has provided policy clarity and stability that markets appreciate.
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Are foreign investors returning to the London property market in 2025?
Clear signs indicate that foreign investment in London property is recovering strongly in 2025.
Property inquiries from overseas buyers have risen 17% year-on-year, with particular interest from American, Middle Eastern, and Asian investors. The relatively weak pound continues to offer value to foreign buyers, effectively providing a discount on London properties when purchased with stronger currencies.
- American buyers have become increasingly active, taking advantage of the strong dollar
- Middle Eastern investment remains robust, particularly in prime central London
- Asian buyers are returning after a period of reduced activity during 2023-2024
- European investors are showing renewed interest following Brexit uncertainties clearing
- Cryptocurrency wealth is driving a new wave of international buyers seeking London property
Prime and super-prime London properties (above £5 million) are seeing the strongest foreign demand, with international buyers accounting for over 50% of transactions in areas like Mayfair and Knightsbridge.
This international demand is a crucial driver of price growth in central London's luxury market.
What factors are driving London property price increases in 2025?
The primary driver of London property price growth remains the chronic undersupply of new homes relative to demand.
London needs approximately 66,000 new homes annually to meet demand, but construction has consistently fallen short of this target. Planning delays, high construction costs, and limited developable land continue to constrain supply, creating upward pressure on prices.
Population growth and urbanization trends persist, with London's population expected to reach 10 million by 2030. International migration, both for work and study, adds consistent demand pressure, particularly for rental properties that later convert to purchase demand.
The return-to-office trend is boosting demand for centrally located properties as hybrid working patterns stabilize around 2-3 days in the office. This has particularly benefited areas with good transport links to major employment centers.
Falling mortgage rates are improving affordability calculations for buyers, while government incentives for first-time buyers provide additional market support.
It's something we develop in our UK property pack.
Could London property prices decline or stabilize instead of rising?
Several factors could potentially limit or reverse London's property price growth trajectory.
Affordability remains the most significant constraint, with London property prices now over 13 times average earnings. This ratio is already stretched to near-historical highs, limiting the pool of potential buyers even as interest rates fall. First-time buyers face particular challenges, with average deposits exceeding £140,000.
| Risk Factor | Potential Impact | Likelihood |
|---|---|---|
| Affordability ceiling reached | Price growth caps at 0-2% | High |
| Major supply increase | Prices stabilize or fall 5% | Medium |
| Economic recession | Prices fall 10-15% | Low |
| Further tax changes | High-end prices fall 5-10% | Medium |
| Global financial crisis | Prices fall 20%+ | Very Low |
If the government successfully delivers on housing targets, increased supply could stabilize prices, particularly in the flat market where oversupply is already evident in some areas. Any economic downturn or external shock could quickly dampen demand.
Regulatory changes targeting overseas buyers or buy-to-let investors could cool specific market segments.
We made this infographic to show you how property prices in the UK compare to other big cities across the region. It breaks down the average price per square meter in city centers, so you can see how cities stack up. It's an easy way to spot where you might get the best value for your money. We hope you like it.
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
London property prices are demonstrating resilient growth as we reach mid-2025, with the residential market up 2.3% annually and clear signs of continued momentum. The combination of falling interest rates, government support, and returning international investment creates a favorable environment for moderate price appreciation.
Based on current market dynamics, expert forecasts, and fundamental supply-demand imbalances, the answer to whether London property prices are going up is: Yes. While growth may not reach the dramatic heights seen during the pandemic boom, the London property market is on a steady upward trajectory with prices expected to rise 3-5% annually through 2026 and achieve cumulative gains of 18-21% by 2029.
Sources
- UK House Price Index for January 2025
- Seven Capital London Property Market Forecast
- Statista Monthly House Price Index London
- Clifton Prime London Property Market Forecast
- Barclays London Prime Property Market Analysis
- Savills Five Year Forecast UK House Price Growth
- Buy Association Group Housing Market Forecast
- Hastings International London House Price Forecast
- Nedbank Private Wealth UK Property Market Outlook
- Bank of England Monetary Policy May 2025