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House prices in London failed to grow last year in stark contrast with the rest of the UK, as affordability pressures kept prospective buyers at bay.
The average house in the capital cost £549,000 in December 2024, unchanged from the same month in 2023, according to data published by the Office for National Statistics on Wednesday.
Zero annual growth in the capital compared with average UK house prices rising 4.6 per cent to £268,000 in the 12 months to December, up from 3.9 per cent in the year to November and the fastest pace since January 2023.
The ONS said some of the UK’s most affordable areas registered the strongest growth, with annual house price increases of 9 per cent, 6.9 per cent and 6.7 per cent in Northern Ireland, Scotland and north-east England respectively.
Jonathan Hopper, chief executive of Garrington Property Finders, said: “Not since the heady post-lockdown ‘race for space’ has the divergence between London prices and the rest of the UK been so stark.
“Buyers in the capital have since [the autumn Budget] become highly price sensitive, and willing to negotiate hard on price or simply look elsewhere.”
Richard Donnell, executive director at property consultancy Houseful, said house prices in the capital “continued to be held back by affordability pressures and the high level of prices relative to incomes compared with the rest of the country.
“This is despite faster jobs growth and high levels of migration for work and study, which have had a greater impact on higher rental values,” he added.
House prices in London are nine times annual earnings, well above the 5.9 ratio for the UK as a whole, according to figures from building society Nationwide.
Mortgage payments as a proportion of earnings among first-time buyers stand at almost 60 per cent in the capital, compared with 36 per cent across the country.
London also has more flats, which have underperformed other property types over the past year.
UK flat prices rose 2.3 per cent in the 12 months to December, compared with price increases of 5.6 per cent for semi-detached house prices and 5.2 per cent for detached properties, according to data published by the Land Registry on Wednesday.
The stagnation in house prices in London last year marks a continued underperformance relative to the national average since 2016, reflecting the impact of Brexit and the Covid-19 pandemic, when buyers raced to buy bigger properties in suburban and rural areas.
Since 2021, higher interest rates have also led to an increase in mortgage rates, hitting prospective buyers.
With fewer households able to buy a property in the capital and limited stock, rents continued to rise at a faster pace than in the rest of the UK, the ONS said.
Rents rose 11 per cent in the year to January in London, reaching an average of £2,227. This increase was above the 8.7 per cent rise across the country and only marginally below the all-time London record of 11.6 per cent in November 2024.
