House prices in inner London posted their steepest annual decline since the global financial crisis in November, underscoring mounting affordability pressures and the impact of uncertainty surrounding changes to property taxation.

Data from the UK Office for National Statistics (ONS) showed prices in inner London fell 4.6 percent year on year, following a 4.3 percent decline in October. The drop marks the sharpest contraction since the 2008–2009 downturn, when prices fell by double digits amid a deep economic recession.

The steepest declines were recorded in the capital’s most expensive boroughs. Kensington and Chelsea saw average prices plunge 16.3 percent to £1.19 million, while Westminster prices fell 15.5 percent to £866,000. These areas have traditionally attracted overseas buyers, though advisers say demand has weakened amid changes to tax rules affecting non-domiciled residents.

By contrast, outer London continued to post gains. Boroughs such as Havering and Bromley recorded annual price increases of 5.2 percent and 6 percent, respectively, highlighting a widening divide between central and suburban markets.

Despite the mixed performance, average house prices across London declined 1.2 percent year on year to around £553,000 in November, compared with a 2.6 percent drop in October.

Property analysts attributed the downturn at the top end of the market partly to speculation ahead of Chancellor Rachel Reeves’ November Budget, which raised concerns over higher taxes on expensive homes. The Budget later confirmed the introduction of a council tax surcharge from April 2028 on properties valued above £2 million, most of which are located in London and the South East.

Market participants said months of uncertainty over potential reforms—including possible changes to stamp duty and capital gains tax—had dampened activity, particularly in prime locations.

Nationally, the housing market showed more resilience. ONS data indicated that UK house prices rose 2.5 percent year on year to £271,000 in November, accelerating from 1.9 percent in October. The North East recorded the strongest growth at 6.8 percent, while London was the only region to post an annual decline.

Affordability pressures continue to shape price movements, analysts said, with higher-priced areas seeing corrections as buyers shift toward more accessible locations. Meanwhile, easing mortgage rates have offered some support, although broader economic weakness continues to weigh on confidence.

The ONS also reported that annual private rent growth slowed to 4 percent in December, down from 4.4 percent in November and well below its 2024 peak, easing pressure on tenants as wage growth outpaced rent increases.