London flats’ price slump hits landlord exits

Landlords preparing to sell an inner London flat face a market where average prices have dropped by almost £49,000 since June last year.

That’s according to a Daily Telegraph analysis of Land Registry figures which show an 8.1% fall in the year to August.

The newspaper warns that is the biggest annual decline since 2009, while flat prices nationally fell by 1.6%.

Across the capital’s 15 inner boroughs, the August average was £522,200, which equals July 2015 levels.

However, for those who bought at the market’s peak in September 2022, they face a larger gap with average values falling by £71,935.

Buy to let retreat

The Telegraph reports that the flat market has suffered from the departure of small landlords, alongside higher borrowing costs and stamp duty.

The report links investor sales to cuts in mortgage interest tax relief and the abolition of Section 21 ‘no-fault’ evictions.

Landlords are reluctant to buy those flats because they face a higher stamp duty bill, too.

The surcharge on additional homes began at three percentage points in 2016 and rose to five percentage points in 2024.

Mortgage costs squeeze buyers

Higher borrowing costs have hit buyers hardest in areas where property prices were already high relative to earnings, according to the report.

Bank of England figures show the average rate on a new two-year fixed-rate mortgage rose from 3.98% in March to 4.69% in August.

That increased the annual cost of taking out a £200,000 loan by £960.

The Telegraph says these costs matter particularly to first-time buyers and those on lower incomes, who are more likely to purchase flats than houses.

Stamp duty purchase costs

The report also identifies stamp duty as a barrier for ordinary home movers buying in the capital, where higher prices push purchases into higher tax bands.

Buying an average inner London flat in August incurred a standard stamp duty bill of £16,110, before any additional-home surcharge.

That compared with £1,382 for an average UK flat.

In Westminster, one of the country’s most expensive markets, flat prices fell by 15% in the year to August, compared with a 7.4% decline recorded in 2009.