Property prices across London have declined by 3.6% year-on-year, with the steepest falls concentrated in higher-value inner boroughs, according to new data from E.surv. The analysis reveals a widening performance gap between inner and outer London markets, with inner London prices down 8.7% compared to a 2.6% fall in outer areas.
The average property price in inner London now stands at £687,415, compared with £518,655 in outer London, representing a gap of almost £169,000. The data suggests that affordability pressures began in the capital’s most expensive areas before spreading to the wider market.
Diverging market performance
Outer London continued to show annual price growth through much of 2024 and early 2025, while inner London had already started registering price falls. According to E.surv’s analysis, those falls have become sharper over the past year, indicating that pressure in London started in the higher-value inner boroughs before spreading more widely.
A City Tracker analysis shows that 17 out of 30 major UK cities have yet to recover to 2022 price levels. When adjusted for inflation, which has risen 16% during this period, the investment returns are further diminished. Wales shows positive year-on-year performance in most indices, though Cardiff prices remain marginally below 2022 levels.
Flat market under pressure
The weakness is particularly pronounced in the flat sector. Inner London flat prices are now 11.2% below April 2020 levels, with the index at 88.8 in April 2026. By contrast, outer London flats have softened but remain 4.1% above their April 2020 level.
Outer London flats rose strongly after 2020, reaching 113.4 on the index in October 2022. Prices have eased since then but remain above the starting point. Inner London flats followed a different trajectory, briefly returning to their April 2020 level at 100.9 in April 2024, before falling to 96.6 in April 2025 and 88.8 by April 2026.
E.surv attributes the weakness in inner London flats to several overlapping factors. Higher mortgage rates have had a larger impact where prices are highest, reducing buying power for first-time buyers and mortgaged investors. Increased service charges and running costs have also made some flats less attractive relative to houses or lower-density homes.
Policy and structural factors
The end of Help to Buy removed a source of demand for new-build flats, while some inner London markets continue to work through a larger supply of apartment stock. Tax changes add another layer of pressure at the top end, with higher stamp duty costs for overseas buyers and the introduction of a mansion tax affecting higher-value homes from 2028 likely to be felt most in inner London.
The analysis comes amid rising void costs for landlords and broader regulatory changes affecting the property sector.
E.surv notes that these factors may not fully explain the fall in flat prices, but are likely adding to caution in a market already constrained by weaker affordability and softer demand. For sellers and lenders, the data points to a more price-sensitive inner London flat market, where sold prices are reflecting weaker demand, higher buyer costs and increased competition from similar stock.
