London’s property investment market loss shines as prices slide

London’s housing market is losing its shine as real-terms values stall, leading landlords and investors to sell up, an analysis reveals.

According to wealth management firm Rathbones, it has found that between 2016 and 2024, residential values in the capital increased by only 1.3% annually, well below the 3.8% rate of inflation.

The poorer performing areas include Wandsworth, Lambeth, Tower Hamlets, Kensington and Chelsea, and Westminster where each recorded less than 0.5% annual growth, while Southwark saw a 2% decline.

Outer boroughs offer little relief with the strongest performer, Bexley, averaged 2.8% growth per year, that’s less than half the rate seen from 1995 to 2016.

In comparison, a portfolio of UK and global shares returned 7.2% annually over the same period.

BTL landlords are selling

The firm is also pointing to increasing costs for landlords from tax changes, stamp duty surcharges and the potential impact of the Renters’ Rights Bill will hurt the appeal of buy to let and second-home investments.

Rathbone’s divisional director, Charlie Newsome, said: “Many buy to let and additional rental properties, where yields were already razor-thin, have now become unviable as businesses due to the twin pressures of rising interest rates and increasingly burdensome regulation – set against a backdrop of stagnating property prices.

“It’s no surprise that several of our clients have opted to sell their buy to let properties and use the proceeds in ways that better align with their long-term plans—including gifting assets for inheritance tax planning.”

London’s boom is over

The firm’s report also highlights a big difference of the ‘golden age’ of 1995 to 2016, when London’s property prices outpaced every other UK region.

That’s when house prices rose 9.1% a year on average, with Hackney, Southwark, Lambeth and Westminster all recording double-digit gains.

Now, the growing speculation over a new levy on property income is fuelling unease among landlords.

The firm’s divisional lead of financial planning, Rebecca Williams, said: “Once a haven for property investment, the London property boom is well and truly over.

“Our research shows that the key factors which once fuelled the meteoric rise in house prices no longer apply.”

She added: “We’ve also seen a growing number of clients with substantial property portfolios looking to disinvest, amid speculation that a new property tax – such as national insurance on rental income – could be introduced in the upcoming Budget.

“Such a measure could be the final nail in the coffin for London property as a viable investment.”