This time last year, property experts were not optimistic about house prices in the capital.
With surging interest rates, the ever-rising cost of living and fears of a recession, Lloyds forecast a nine per cent fall for 2023, while Capital Economics, Savills and Credit Suisse were even more pessimistic, estimating drops of 12 per cent, 12.5 per cent and 15 per cent respectively.
Thankfully, it hasn’t been that bad. Sold price data from Hamptons and the ONS shows that house prices across Greater London rose by a measly 0.4 per cent on average.
Between 2021 and 2022, in contrast, they increased by 5.7 per cent. As expected, mounting pressure on household finances from interest rates and inflation has played a role in this muted growth.
According to Marc von Grundherr at Benham and Reeves, this paltry growth is partly a result of the lack of overseas buyers and is a sign of a more normalised market. “Obviously, the rising cost of living has really held the market back.”
An average doesn’t tell us everything, though. Some boroughs have seen growth of up to 6.4 per cent, others a drop of 10 per cent.
Here are the London areas which have seen the greatest rises —and falls— in property prices this year.
London boroughs with biggest house price growth 2023
If you are a homeowner in Hounslow, it’s good news for you. The west London borough has seen one of the biggest rises in house prices across the capital, with the average property increasing by 5.1 per cent in value, from £435,600 last year to £457,730 in 2023. This represents an increase of £22,130.
“The driving factor is the regeneration that’s gone on there,” says von Grundherr. “The growth and demand that we’ve seen in the area is amazing.”
Hounslow has been positioning itself as an entrepreneurial borough, and has seen companies like JCDecaux, Cisco, Sky and Disney base themselves there. This, says von Grundherr, is having a knock-on effect on development – and on house prices.
“It doesn’t surprise me that it’s second-top place with house price growth, because people are coming to live in the area…lots of people are renting and then buying,” he adds.
“It’s well-positioned for the M25 and Heathrow, with good train links into London. There’s a lot of amenities and green open space, which people move to. There are good schools, and it’s a safe area with one of the lowest crime rates in London, which families look for. And of course it’s more affordable.”
Only the City of London has seen greater growth than Hounslow, with properties rising from £854,220 to £908,520 – an increase of 6.4 per cent.
Yet because the number of transactions in this compact patch of central London is so small, price changes are volatile, cautions David Fell at Hamptons.
Tower Hamlets, Greenwich, Havering, Haringey and Merton have also seen above average growth in prices. In Tower Hamlets prices rose by 4.6 per cent, from £464,050 to £485,470. Greenwich saw a rise of 2.8 per cent, while house prices in Havering, Haringey and Merton all rose by 2.5 per cent.
Outer vs inner London
Broadly speaking, the capital’s most affordable areas —often located in outer London boroughs— have continued to see the biggest growth in house prices this year.
“Ever since 2016 outer London has been pioneering much of the capital’s price growth,” says Fell.
“Driven by the tail end of the house price cycle coupled with a shift in buyers' priorities towards larger homes induced by the onset of the pandemic, the gap between Inner and Outer London prices has been closing throughout 2023.
"And as affordability concerns grew on the back of rapidly rising mortgage rates, it’s been the cheaper boroughs (and flats) which have proven most resistant to house price falls.”
Fell points out that five of the 13 inner London boroughs recorded price falls this year, while only two of the 20 outer London boroughs saw prices drop (Enfield and Harrow).
Tower Hamlets and Greenwich, the two inner London boroughs that saw the highest price growth this year, were among the most affordable, with average prices below the £500,000 mark.
For von Grundherr, the post-pandemic search for space has fuelled this shift from inner to outer London. “You get more for your money; you get more space, especially if you’re working from home. There’s more outside space and green open space, and so there has been this general move out of central London to further out.”
Likewise, for investment buyers, von Grundherr says that Zones 4, 5 and 6 are currently offering better rental yields, fuelling the drive to buy in outer London areas.
With the exception of the City of London, the highest-ranked more affluent borough was Hammersmith and Fulham, where prices rose by 1.5 per cent, followed by ever-in-demand Richmond, with a 0.3 per cent rise.
The London boroughs with the biggest house price falls
This year, Kensington and Chelsea saw the biggest drop in house prices, by a considerable distance. Property values fell by 10 per cent, from £1,480,880 to £1,332,890 this year – a difference of £147,990. This, according to Fell, means that values are “well below where they were in 2016”.
Nevertheless, house prices in the west London borough are still higher than anywhere else in London.
“My honest view is that the reason house prices have down been the reduction in foreign buyer demand,” says von Grundherr.
“People are still coming, but the drop in those buyers who buy when they’re here has definitely affected prices in Kensington and Chelsea…For a new investor, with all the stamp duty and taxes, it’s nowhere near as good as it used to be.”
“On the reverse of that, there’s value in prime central London now – I think this is a very good time for those looking to buy there, because you can get discounts and deals.”
House prices fell in seven boroughs: Kensington (-10 per cent), Islington (-1.2 per cent), Wandsworth (-0.9 per cent), Westminster (-0.8 per cent), Camden (-0.7 per cent) and Enfield (-0.2 per cent).
With the exception of Enfield, these are among the most expensive places to buy a property in London, and are all classified as being in inner London. According to Fell, this shift is due to affordability, with sky high mortgage rates and the rising cost of living pushing buyers to cheaper areas.
Compared to 2022
Last year, Barking and Dagenham —London’s cheapest borough— saw the biggest rise in property prices, with values up by 6.6 per cent to £339,100, according to data from Zoopla.
In second place was Bexley, with a 5.7 per cent rise to £403,800, followed by Havering (5.5 per cent to £428,900) and Sutton (5.2 per cent to £445,800).
These four boroughs continued to see prices rise, with Havering overtaking Barking and Dagenham. This year, prices rose by 1.9 per cent in Barking and Dagenham and Bexley, and 1.3 per cent in Sutton, according to Hamptons’ data.
In 2022, Zoopla's data showed that no boroughs saw a drop in house prices. Westminster had the smallest rise in value, at 1.3 per cent, followed by Kensington and Chelsea, at 1.7 per cent. These two boroughs continue to see the lowest growth this year.
