For more than a decade, headlines have periodically announced the death of London. Each time, the claim is framed as a sudden collapse, a dramatic turning point, or proof that the capital’s dominance is finally over. In reality, what is being described today is not a new phenomenon but the long tail of changes that began years ago.
London’s property market reached its peak around 2014, particularly at the prime end. At that point, prices had risen at an unsustainable pace, driven largely by international capital flowing into the city. Huge sums of overseas cash entered the market, without mortgage constraints and pushing prices far beyond local affordability. Sealed bids, extreme premiums over asking prices, and speculative behaviour became normal. When that flow slowed, the correction was inevitable.
What is striking now is not that London is struggling, but that the media has only just caught up. The slowdown has been visible for years, especially in prime areas, yet the narrative of collapse is being presented as breaking news. In truth, this is how property cycles work. The top turns quietly, transaction volumes fall first, and prices drift or stagnate long before headlines follow.
Recent fiscal policy has added pressure. A more redistributive approach to taxation has disproportionately affected London because of its concentration of wealth. When governments promise that those with the broadest shoulders will bear more of the burden, the impact is inevitably felt most in the UK’s most economically dominant city. Higher taxes on assets, property, and income dampen confidence, and confidence is central to housing markets.
This has led to a difficult environment for sellers. For many homeowners, selling now would likely mean exiting near the bottom of the cycle. While moving within the same market can offset some of that pain, from an investment perspective London currently looks unattractive. Yields are low, borrowing costs are high, and rental growth is constrained by stretched affordability and falling real disposable incomes. Without strong rental growth, holding property becomes much harder to justify.
There are still opportunities, but they require precision. London is not a single market. The sharpest declines have been concentrated in ultra-prime boroughs such as Westminster, Kensington and Chelsea, where asking prices have fallen sharply and stamp duty has become a major deterrent to moving. At this level, many owners can afford to sit tight, so reduced activity shows up more in transaction volumes than in headline price crashes.
London’s dominance also remains structurally intact. Despite decades of talk about rebalancing the economy, the capital continues to function as an outsized growth engine by international standards. That brings productivity and global appeal, but also vulnerability when policy or sentiment turns against wealth concentration. Other UK cities do not replicate this dynamic at scale. While there are prime pockets elsewhere, they do not operate as distinct markets in the same way.
Looking beyond London, more compelling value is emerging in regions with regeneration and infrastructure investment, particularly parts of the northeast. Selectivity matters, but areas benefiting from long-term development projects may offer better yields and stronger growth prospects than the capital in the current cycle.
Retirement property
Across the Atlantic, housing affordability has become an even more explosive political issue. In the United States, real house prices have not adjusted downward as they have in the UK, despite rising interest rates. Proposed policies to make borrowing easier, including tapping retirement savings for deposits, aim to help first-time buyers but risk pushing prices higher in already constrained markets. Credit availability remains the single strongest driver of house price movements, and expanding it without addressing supply often stores up problems for the future.
Donald Trump is desperate to be seen to be tackling his nation’s affordability crisis and has made home ownership a prime target. Alongside putting pressure on the Federal Reserve to cut interest rates he has ordered buy-ups of mortgage-backed securities to lower yields and banned institutional investors from owning single-family homes. His latest pledge is to allow homebuyers to use a proportion of their 401k retirement savings towards property downpayments.
Using property as a substitute for pensions can work under certain conditions, particularly over long time horizons and with low volatility assets. However, it also concentrates risk and reduces diversification. While such policies may help today’s buyers, they are unlikely to improve affordability for the next generation unless supply constraints are tackled directly.
Mortar & Margins is produced in Solihull by Propenomix. Its editors are Duncan Hooper and Adam Lawrence