Why Are London's House Prices Rising Faster Than They Have in Years?

In recent months, the London property market has experienced its fastest growth in over two years. The Nationwide Building Society reported a 3.2% annual increase in UK house prices for September, with London seeing a 2% year-over-year rise. The average London property now stands at £524,685, making it one of the strongest performing regions in southern England. But what’s driving this surge, and why are prices in the capital rising so swiftly?

The average London property price now stands at £524,685, making it one of the strongest performing regions in southern England. But what’s driving this surge, and why are prices in the capital rising so swiftly? Here Anthony Pepe, a North London estate agent covering Winchmore Hill and the surrounding areas, look at some of the principal reasons.

Improved Mortgage Rates Fuel Buyer Confidence

One key factor boosting London’s property market is the return of more favourable mortgage rates. Although the Bank of England’s base rate is holding at 5%, competition among lenders is driving mortgage rates below 4%, making property purchases more attainable. Mark Harris, CEO of SPF Private Clients, highlights that as rates have decreased, buyers who were previously hesitant have now begun re-entering the market. For instance, Nationwide has introduced a product allowing first-time buyers to borrow up to six times their income, enhancing accessibility for those looking to step onto the property ladder.

Market Stability and Pent-Up Demand

Stable interest rates are enhancing buyer confidence, with the Bank of England’s steady approach to base rates fostering a predictable market environment. This stability has encouraged more competitive mortgage deals from lenders, which in turn is stimulating market activity. The increase in buyer interest seen in September is closely linked to this market stability, alongside mortgage offerings below 4%. Prospective buyers are increasingly entering the market, motivated by the opportunity to benefit from lower rates and more favourable borrowing conditions.

Increased Listings Amid Potential Tax Changes

The upcoming Autumn Budget has sparked concern over potential increases in Capital Gains Tax, particularly affecting landlords who may face steeper tax burdens. This anticipation has led many landlords to sell, with one in five properties listed in inner London being former rental properties These changes, alongside rising buyer demand, have spurred more listings and helped the market absorb new inventory.

Resilient Demand Across Property Types

Nationwide’s data reveals that demand remains robust across various property types, though terraced houses have seen the sharpest price growth, rising by 3.5% over the past year. Flats and semi-detached properties followed closely with increases of 2.7% and 2.8%, respectively. Detached properties, which surged during the pandemic’s "race for space," continue to hold strong, with a 26% price increase since early 2020. This resilience across property types reflects a broader demand for all types of housing, driven by London’s consistent appeal as a residential and investment destination.

Outlook and Cautions

While buyer sentiment remains positive, property experts advise caution,  warning that although the market is recovering, transactional volumes are still below pre-pandemic levels. Buyers remain sensitive to pricing, and unrealistic asking prices may slow sales even with improved demand. However, experts agree that the resilience seen in current house price growth and rising buyer inquiries bodes well for the months ahead.

Key Takeaways

With mortgage rates improving, stable interest rates, and increased listings, the London property market is experiencing a resurgence. While not an explosive rise, this steady growth reflects a renewed buyer confidence and a demand that’s keeping London’s housing market active and competitive. As we approach the year’s end, London’s property market stands strong, offering sellers opportunities and buyers more favourable conditions than seen in recent years.

Anthony Pepe – an Estate Agent in Winchmore Hill
Whether you are interested in (or are offering) a property for sale in Winchmore Hill, a home to rent in Crouch End, or lettings in Harringay, Anthony Pepe can help. We have a network of offices across North London and Hertfordshire, and we can offer landlord and property management services alongside home sales and rentals.

Follow this link to get in touch.

Adapted from The Standard