Four out of five homes in London and the South East are experiencing price reductions, according to the latest Zoopla House Price Index, marking a significant regional divergence in the UK property market.
The data reveals that more than a third of properties across the country are now in postcode areas where house prices are falling, up from just 12% a year ago. The concentration of price drops in southern England contrasts sharply with rising values elsewhere in the country.
Regional variations
Outside London and the South East, house prices have increased, with the North West leading growth at £6,600 higher on average. The divergence reflects the varying impact of higher mortgage costs on different regional markets.
Home sales overall have fallen 7% during the past year, while supply has increased by 7% in the same period, creating more favourable conditions for buyers to negotiate on price.
Richard Donnell, Executive Director at Zoopla, said: “The extra cost of mortgages has made home buyers more selective while greater choice of homes for sale has increased the scope to negotiate on price. The impact is being felt by sellers in southern England where house price falls are most concentrated as average prices continue to rise across the rest of the country.”
He added that well-priced and presented properties are still selling at the same pace as last year, indicating continued demand despite affordability pressures.
Market outlook
Zoopla indicated that reform of the 5% stamp duty band in Wednesday’s Budget could support the market in southern England, while the Your First Home scheme could assist up to 10% of first-time buyers. Industry professionals have been calling for stamp duty reform as transaction volumes remain under pressure.
Tom Bill, Head of UK Residential Research at Knight Frank, said: “Sellers increasingly need to reflect the tougher mortgage rate landscape when setting asking prices. Buyers’ budgets are being squeezed as the Middle East conflict sends borrowing costs higher, but the overall number of mortgage approvals has also fallen, which has weakened demand further.”
Nathan Emerson, Chief Executive at Propertymark, noted that the housing market is becoming increasingly localised, with higher mortgage costs putting particular pressure on affordability in southern England. He emphasised that realistic pricing and informed advice from property professionals remain essential to achieving successful sales.
Donnell stated that the biggest boost the Budget could provide would be creating conditions for lower mortgage rates, with activity expected to strengthen once rates move back below 5%. Analysis of the autumn budget’s impact on London property suggests fiscal measures will play a key role in market recovery.
The data indicates a market where regional performance is increasingly divergent, with affordability constraints most acute in areas where prices remain elevated relative to local incomes.
