The London flat market is in free fall, stark figures reveal.
Owners in some parts of the capital have seen the value of their home fall by as much as 18 per cent in the past year alone, according to the Land Registry.
In extreme cases, flat owners have reported losses of up to 34 per cent on homes they bought six years ago – with hundreds of thousands of pounds wiped from the value.
Many Londoners bought flats as a stepping stone on to the property ladder, but now they are increasingly having to sell at a loss. Some are even finding they can’t sell at all.
The worst off are those who decided to buy a new build. Anyone who opted for a brand-new apartment in the past 20 years is highly likely to be selling at a loss, analysis by estate agent Hamptons shows.
In 2025, roughly two in every five owners who had bought such a flat in the past 20 years sold for a loss.
So why are apartment prices in the capital plunging and which areas have been hit the hardest?
Money Mail asks the experts what is causing the free fall – and whether it is worth snapping up a flat on the cheap.
Which areas are the hardest hit?
In Hammersmith and Fulham, two thirds of all flat owners who previously bought new sold at a loss last year.
The second-hand flat market, which includes older flat conversions – many of Victorian or Georgian origin – are also suffering.
Close to one in every five flat owners who bought in the last 20 years sold a second-hand flat at a loss last year, according to Hamptons.
That rises to 30 per cent in the London borough of Kensington and Chelsea and 26 per cent in the City of Westminster.
Many Londoners bought flats as a stepping stone, but now they are having to sell at a loss
Those in more central locations are seeing prices dive most aggressively. In the City of London, average flat prices are down 18 per cent year-on-year.
In upmarket Kensington and Chelsea, the average flat is now selling for less than £950,000 – down from almost £1.15m a year ago. That’s a 17 per cent fall.
And in the City of Westminster, which includes popular areas such as Maida Vale, Soho, Paddington and St John’s Wood, flat prices are down 16 per cent.
The average flat in the borough has gone from £946,000 in October 2024 to £791,000 in October last year.
More affordable London boroughs further out have not avoided seeing massive price falls, either.
Prices in Croydon in south London have fallen 6 per cent over the past 12 months, going from £274,000 to £258,000.
And average flat prices in Brent, which includes Harlesden and Wembley, have fallen 6 per cent from £419,000 to £392,000.
Across London as a whole, the average flat has fallen by 5.1 per cent from £450,756 to £427,689.
Shock falls in prices
Flat owners have taken to social platform X to discuss properties selling at massive discounts to the price originally paid.
One owner posted screenshots from Rightmove Sold Prices showing a two-bedroom, south-London flat bought for £315,000 in 2016 but then sold in September 2025 for £111,702. He said the flat was privately owned, not share ownership and the block had cladding deemed a ‘tolerable’ fire risk.
In another example from property site Zoopla, a one-bedroom flat in Croydon sold for £217,000 in July 2016, was listed for sale at £180,000 in March last year and sold in September for £155,000. That is a 29 per cent fall in value.
A search of Rightmove Sold Prices for properties nearby revealed other flats selling at deep discounts.
A two-bedroom apartment bought for £320,000 in August 2016 sold for just £254,000 in August 2025 – a price drop of 21 per cent over a period where UK house prices have risen 31 per cent, according to Nationwide’s index.
Another one-bedroom flat nearby bought for £350,000 in February 2019 sold for £230,000 in July 2025, a massive 34 per cent drop in value.
On the opposite side of London, a search revealed some Hackney developments have also seen price drops, with a two-bed bought in March 2021 for £752,225 selling for £712,000 in June 2025 and a nearby one-bed flat sold for £410,000 in November 2021, selling for £397,500 in May 2025.
How long have prices been dropping?
The plummet in flat prices has come after a decade of market stagnation in the capital.
The price of the average flat across the whole of London is lower now than it was in October 2016. The typical flat back then sold for £433,000. Nine years later it’s £427,000.
David Fell is the lead analyst at Hamptons
David Fell, lead analyst at Hamptons, says that when factoring in inflation, London flat owners are staring at losses of up to 30 per cent in real terms .
He said: ‘Over recent years, London flat values have mostly flatlined at best.
‘While many owners have struggled to get back what they paid for their flat in cash terms, after taking into account inflation, real-terms losses can run at 25-30 per cent over the past five years alone.
‘This re-assessment of value has fundamentally been driven by increases in service charges, but higher interest rates, coupled with the ending of Help to Buy, have also played a role in pushing down prices.
This long-term trend of falling prices has shifted up a gear in the past year, however.
The tsunami of flat sellers having to cut their losses this year has been feeding through into falling prices.
Why are London flat prices plummeting?
In the case of new builds, it is no secret that they are often sold at a premium to similar homes on the second-hand market.
This means you would expect it to take longer for these properties to increase in value. Anyone selling a new build in the first few years can typically expect a loss.
The Help to Buy scheme that ran between 2013 and 2021 is seen as a major reason for this new build premium widening recently.
The scheme helped tens of thousands on to the housing ladder in London, most of them buying new build flats.
It enabled first-time buyers to purchase a new build with a 5 per cent deposit, with the Government lending between 5 and 40 per cent of the cost of a new-build home as an ‘equity loan’. The loan itself was interest free for the first five years.
This drove demand for new-build flats and pushed prices higher over a sustained period.
But while Help to Buy can explain to some extent which owners have suffered the most when it comes to re-sale, it doesn’t explain why those on the second-hand market have also been doing so badly.
It’s also not to do with owners moving every two or three years.
Hamptons says the average flat seller who made a loss had owned their home for almost nine years, compared to 12.5 years for someone who didn’t.
Richard Donnell, head of research at Zoopla, believes the demise of the London flat market is largely down to there being fewer jobs in financial services as well as higher taxes on overseas buyers and non-doms.
Donnell says: ‘The underperformance for flats has been seen in the markets where values are highest and represents underlying changes to the London labour market post Brexit and the pandemic.
‘For example, loss of financial service jobs; lower levels of overseas buying on higher taxes; and general affordability pressures facing domestic buyers – hence why values are holding up in lower value or more traditional areas.’
The problem with leaseholds
Perhaps the biggest issue is that flats, whether new build or not, often come with the leasehold tag in tow.
Leasehold flats often come with some off-putting strings attached. For a start, many have ground rents they pay to their freeholder in return for no services given.
While ground rents have now been outlawed for all new leaseholds, many still endure these costs.
Some ground rents increase in line with the retail price index inflation rate and change every ten or 20 years.
This means someone who bought a flat with a £600 annual ground rent in 2015 would have seen their ground rent rise to around £950 last year. In ten years, it will rise again and they are entirely at the mercy of what happens to inflation between now and then.
Other ground rents double every ten, 20 or 25 years. Under a ten-year clause, that would see someone paying £600 in 2015 double to £1,200 this year, then in 2035, their ground rent would rise to £2,400 and then to £4,800 in 2045 and so on.
The worst off are those who decided to buy a new build. Anyone who opted for a brand-new apartment in the past 20 years is highly likely to be selling at a loss
These types of ground rents are red flags to lenders and often render homes unmortgageable and unsellable.
But rising ground rents are only part of the problem.
Many leaseholders, especially those in apartment blocks, pay annual service charges which go towards the upkeep of the building.
It commonly covers things such as insurance, cleaning, gardening, repairs of communal areas, surveyors’ fees, fire risk assessments and managing agents fees.
For some apartments, it can also include a gym, concierge and parking.
Service charges have increased by an average of 41 per cent between 2019 and 2024, according to the Property Institute.
It says the average leaseholder is now paying £3,634 a year. However, as we revealed recently, service charges in London have reached terrifying heights. In some areas the average service charge ranges between £10,000 and £20,000 a year.
This is likely putting off many would-be buyers who are reluctant to commit to costs they have little or no control over.
Jonathan Hopper, a buying agent, said: ‘The leasehold tag has become so toxic that I know of law firms that are not even touching it.
‘Buyers are having to ask themselves whether first they can get a mortgage on it, but also whether they’ll be able to sell it in the future.
‘Ultimately, the reason so many flats are selling at a loss is because there are lots of sellers and not enough buyers.’
Donnell said: ‘Overlaid on all of this is uncertainty on leasehold and the extra costs of buying a leasehold and building safety concerns post-Grenfell, which has impacted homes built in the last 20 years as well as the availability of mortgages.’
Is now a good time to buy a London flat?
For anyone who is considering buying a flat, either as a home or an investment, will need to figure out whether the losses are a sign of worse to come or if this is a good time to snap up properties on the cheap.
Flats have always been cheaper than houses, but the price gap has widened over the past decade.
In October 2015, the average price of a flat was £166,100, according to Zoopla compared to roughly £222,400 for a house – a gap of £56,300 on average.
A decade later, the average price of a flat is £191,300 compared to £323,700 for the average house. The gap has increased to £132,400.
This means that the difference between the price of a typical house and flat has gone from 29 per cent in 2015 to 51.5 per cent in 2025.
Zoopla says the typical flat to house price ratio has therefore increased from 1.34 to almost 1.69 in just ten years.
Fell thinks the depressed flat market offers a buying opportunity – particularly if the Government goes through with its promise of leasehold reform.
It has been 18 months since the Leasehold and Freehold Reform Act was passed in the last hours of the Conservative government. But most measures within it have not yet been implemented.
Fell said: ‘Flat values are considerably cheaper than they were, and this potentially opens up an opportunity to buy a home that had previously been unaffordable.
‘And there are some reasonable reasons for optimism when it comes to future expectations of flat prices.
‘In the short to medium term, it’s likely that reform of the leasehold system will give owners more control to shop around for better service and price when it comes to picking a managing agent or even going it alone.
He adds: ‘There is also an increasing recognition that the Building Safety Regulator isn’t working as intended. It’s quite conceivable that a lighter-touch process will emerge, reducing the time and cost of getting major works signed off.
‘This is often work which has stopped owners from selling. And finally, there has been a degree of rollback on inflationary energy policies, which may bring down the cost of running communal heating and hot water systems – one of the biggest drivers of service charge inflation.’
Donnell also believes there is value for money in flats.
He says: ‘In simple terms values are the same today as a decade ago – and there is a buying opportunity so long as you do your homework and really understand the leasehold market and how to manage any risks.
‘Focusing on converted flats and looking at how the property is managed and whether you could self-manage or there is a share of freehold are more attractive.’
