London house prices recorded their first monthly increase in six months during May, rising 0.4%, according to the latest data from Nationwide Building Society. The modest uptick has sparked cautious optimism among estate agents and property developers across the capital.
The average property price in London now stands at £537,000, still 2.1% lower than the same period last year but showing signs of stabilisation after a prolonged downturn driven by higher interest rates.
“This is the green shoot we’ve been waiting for,” said Sarah Middleton, head of residential at Knight Frank’s central London office. “Buyers who sat on the fence through the winter are starting to return, particularly in the £500,000 to £750,000 bracket.”
The Bank of England’s decision to hold the base rate at 4.25% since March has helped calm mortgage markets, with average two-year fixed rates dipping below 5% for the first time in over a year. First-time buyers are leading the recovery, accounting for 38% of all new mortgages in April.
However, analysts warn against premature celebration. “One month does not make a trend,” said Howard Archer, chief economic advisor at the EY Item Club. “Affordability remains stretched, and the full impact of higher borrowing costs is still working through the system.”
Areas seeing the strongest activity include Walthamstow, Lewisham, and Barking — outer London boroughs where prices remain relatively accessible. Prime central London postcodes including Kensington, Chelsea, and Westminster remain subdued, with international buyer demand still below pre-pandemic levels.
The rental market continues to tighten, with average London rents rising 5.8% year on year as would-be buyers remain in rental accommodation longer. The average one-bedroom flat in zone 2 now commands £1,950 per month.
Estate agents report that well-priced properties in popular areas are receiving multiple offers within the first two weeks of listing — a dynamic not seen since late 2023.
“We’re advising sellers to be realistic,” said James Bailey of Foxtons. “The days of frenzy are behind us, but the market is functioning again. Price it right and it will sell.”
The government’s Mortgage Guarantee Scheme, extended in March, continues to support buyers with 5% deposits on properties up to £600,000. Industry bodies are urging the Chancellor to extend Help to Buy equity loan options in the upcoming Autumn Statement.