Property Price Falls in the UK: A Deepening Trend

The UK property market is experiencing a significant downturn, with prices falling across various regions and boroughs. Among the most striking examples is the Royal Borough of Kensington and Chelsea in London, which has become the first borough to record a staggering 35% nominal price fall since the decline began. This milestone, observed as of March 2025, underscores the severity of the current market correction, particularly in the capital. The Royal Institution of Chartered Surveyors (RICS) has issued a stark warning, projecting that London will face the largest property price declines in the UK in the near future. This article delves into the latest statistics, projections, and underlying factors driving this trend.

Kensington and Chelsea: A 35% Nominal Price Drop

Kensington and Chelsea, long regarded as one of the UK’s most prestigious and expensive property markets, has seen its fortunes reverse dramatically. As of December 2024, provisional data from the Office for National Statistics (ONS) indicates that the average house price in the borough fell to £1,070,000, down 22.9% from £1,389,000 in December 2023. However, posts on X and emerging reports suggest that by March 2025, this decline has accelerated to a 35% nominal drop from its peak, marking a historic low for the borough. This equates to a loss of approximately £485,000 per property from the £1,555,000 average seen at its height in earlier years.

 

This steep fall is not an isolated phenomenon but part of a broader trend affecting high-value London boroughs. The City of Westminster, for instance, saw a 16.1% annual decline in 2023, with average prices dropping by over £100,000 to £1,048,330 by the end of last year, according to ONS data analysed by estate agent Hamptons. The combination of high asking prices, reduced demand from wealthy international buyers, and economic uncertainty has hit these prime markets hardest.

RICS Warning: London to Bear the Brunt

The RICS, a leading authority on UK property trends, has sounded the alarm about London’s vulnerability. In its latest statements, reported on March 13, 2025, RICS predicts that the capital will experience the most significant price falls across the UK in the coming months. This projection aligns with earlier data from its Residential Market Survey, which showed a house price balance of -53 in July 2023—the lowest since 2009—indicating widespread price declines reported by surveyors. By November 2024, this balance had improved slightly to +25, reflecting a modest uptick in sentiment, but the overarching trend remains downward.

 

RICS attributes London’s projected decline to several factors: rising interest rates, a tougher credit environment, and a “whiplash effect” from fiscal policy changes, such as the scrapping of the non-dom tax regime in the October 2024 Budget. These conditions have dampened demand, particularly in high-end markets like Kensington and Chelsea, where buyers are more sensitive to economic shifts and tax policies. The RICS survey also notes a persistent drop in new buyer inquiries and property sales, suggesting that the market has yet to find its floor.

National Trends and Projections

While London is poised for the steepest declines, the UK as a whole is not immune. The ONS reported a 1.4% drop in the national average house price in 2023, bringing it to £285,000—a loss of £4,000 per home. In England and Wales, prices fell by 2.1% and 2.5%, respectively, while Scotland and Northern Ireland bucked the trend with gains of 3.3% and 1.4%. However, regional disparities highlight the uneven nature of the downturn. London’s 4.8% decline in 2023 outpaced the South East’s 4.6% fall, contrasting with a 1.2% rise in the North West.

 

What’s Driving the Decline?

Several forces are converging to depress UK property prices, particularly in London:

1. Interest Rates and Mortgage Costs: The Bank of England’s base rate, held at 5.25% in late 2023, has kept borrowing costs elevated. Two-year fixed-rate mortgages reached 6.86% in July 2023, the highest since 2008, squeezing affordability for prospective buyers.
2. Economic Uncertainty: Inflation, which peaked at 11.1% in October 2022 and fell to 3.2% by March 2024, remains a concern. Wage growth of 5.6% has not kept pace with rising living costs, eroding purchasing power.
3. Policy Shifts: The removal of the non-dom tax status has deterred wealthy international buyers, a key demographic in Kensington and Chelsea. Meanwhile, the looming stamp duty deadline in April 2025 has accelerated sales but depressed prices as sellers compete.
4. Supply and Demand Imbalance: While rental demand surges—London rents rose 6.9% in 2023 per ONS data—homebuyer demand has weakened. In prime areas, cash-rich owners are opting to hold rather than sell at a loss, reducing transaction volumes.

The Road Ahead

The UK property market, and London in particular, stands at a crossroads. Kensington and Chelsea’s 35% nominal price fall may foreshadow deeper declines if RICS’s warnings materialise. Posts on X speculate that the borough could even approach a 50% drop, though this remains unconfirmed. Nationally, Halifax’s February 2024 data showed a 0.1% monthly dip, hinting at a slowdown as stamp duty changes loom.

 

Yet, there are glimmers of hope. Knight Frank revised its 2024 forecast to predict a “mini recovery” in London, buoyed by sub-4% mortgage rates. Savills expects transactions in the £5 million-plus segment to rebound post-election, assuming political stability. For now, however, the slide continues, with London—and Kensington and Chelsea in particular—leading the descent. As Jonathan Hopper of Garrington Property Finders noted, “The recovery remains tentative,” and buyers may find value in this reset—if they can weather the storm.

 

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