This year could present a window of opportunity for Londoners trying to get on the housing ladder as affordability improves to the most favourable levels seen for 12 years.
New research reveals that average house prices will be 9.3 times average earnings this year after being as high as 10.7 in 2018 and 10.6 in 2022.
Following a tumultuous economic period of rapidly rising interest rates, factors such as growing wages, cuts to the bank base rate and gradually improving mortgage deals — all within a subdued housing market — mean that household incomes will go a little bit further when buying a home in 2025.
“From a peak in 2015, London’s house price affordability has improved over the past few years. While house prices have broadly risen on average across the capital, growth in average earnings has caught up such that the ratio of house prices to earnings is at its lowest in more than a decade,” reads the report by Mitheridge capital investment bank and Oxford Economics.
The window is likely to be small, according to the data. The continued lack of supply in London, in combination with an increase in demand, will push up property values from 2026 onwards, so that house prices climb back to 10 times earnings by 2029.
This fits with the most recent outlook published by Savills. The estate agent predicts a three per cent growth in house prices in London in 2025, four per cent in 2026, up to as much as 3.5 per cent in 2027.
London’s most affordable borough
First-time buyer deposits remain eye-wateringly high at an average of £144,000 (UK Finance), meaning London’s housing market is now an inheritocracy largely funded by the Bank of Mum and Dad, yet experts forecast the return of young buyers this year.
“We are already seeing a rush of first-time buyers trying to purchase before the stamp duty threshold lowers from £425,000 to £300,000 in April,” says Marcus Dixon of JLL.
Katy Warrick of Savills says this will continue after the cut-off date and those who can stump up the huge deposit will find themselves searching for rare pockets of value in areas ripe for regeneration.
The cheapest homes are in Barking and Dagenham where the average house price is £338,000 (against a London average of £520,000) and the cost of a typical first-time buyer home is £320,000, according to the CBRE Hot 100 report.
Swathes of new homes are coming to this part of town — 3,800 are at planning stage or have been granted permission. That’s 14 per cent of the pipeline across London.
The construction of 740 new homes started in 2024, part of the 20,000 new homes being delivered as part of the creation of Barking Riverside. Shared ownership homes are on sale here: £270,000 for a one-bedroom apartment or £67,500 for a 25 per cent share with £464 a month on rent.
Pockets of value in unexpected places
Property close to central London has long been the preserve of the very wealthy but new infrastructure-led regeneration projects could lead to the creation of new neighbourhoods in Zones 1 and 2.
In the autumn Budget Labour confirmed the funding of the 7.2km HS2 tunnel from west London to Euston in a bid to trigger a wave of private investment into new social infrastructure and new homes.
“This could be the next King’s Cross,” says Warrick, although under the Starmer government greater focus on affordable housing provision is expected.
There are other schemes in Camden with new homes available now that are well placed to benefit from the redevelopment of Euston.
The latest phase of Agar Grove has gone on sale. This is Camden council’s estate regeneration into a 500-home energy efficient neighbourhood. There is a new phase on sale with one-bedroom flats for £559,000.
More traditional London roads in exclusive areas could see regeneration-led house price rises — such as Ifield Road at the western edge of Chelsea. One-bedroom apartments in period conversions here go for £450,000.
“This end of Chelsea is just a few minutes’ walk from the King’s Road and set to benefit from the 4,000-home redevelopment of Earl’s Court,” says Becky Fatemi of Sotheby’s.
Activewear designer Siri Saritasurarak used shared ownership to buy a 25 per cent stake in her one-bedroom flat in Canary Wharf’s Consort Place
Christopher Andreou
‘I watch the NYE fireworks from my balcony’
Siri Saritasurarak runs her activewear brand RAIA from her one-bedroom home in Canary Wharf’s Consort Place (a collection of towers with the tallest 65 floors).
“I compared size of apartments with Zone 4 but I knew if I settled for anywhere else I would be disappointed by the location,” she says. She used shared ownership to buy a 25 per cent stake worth £135,250 through Latimer Homes. She can see the City from her balcony, Greenwich from the other side and watch the NYE fireworks.
Parkland and wellbeing are the new sell
New neighbourhoods based around existing or new parkland are in vogue. “There is real demand for green space,” says Warrick.
“New homes centred around parks and lakes and with a focus on wellbeing is the new sell. Buyers will take green space on their doorstep and a longer walk to the station. They are choosing parkland over expensive amenities that drive their service charge up,” she adds.
Warrick cites Dylon Riverside next to Lower Sydenham station (Zone 4) with a playpark and overlooking the River Pool (a tributary of Ravensbourne River) where there are a few two-bedroom homes remaining from £480,000.
Newham’s Cerulean Quarter in Canning Town has a linear park with a sprint and jogging track. There are homes within the 32-floor tower for £400,000.
The 53-acre masterplan of Canada Water (Zone 2) will bring 3,000 new homes and 12 acres of new green space including a 3.5-acre park. The first new homes have just gone on sale in the 35-storey Founding tower. Prices start from £704,000.
The other major park-based scheme is Brent Cross in Zone 3. The £8 billion regeneration will comprise 6,700 new homes spread across 180 acres of parkland with a new mainline station (Brent Cross West that connects to St Pancras in 12 minutes). There are one-, two- and three-bedroom homes here on sale from £420,000.
Will the March Budget provide a ray of light?
Despite easing affordability, albeit temporarily, the outlook remains bleak for those first-time buyers who can’t rely on the Bank of Mum and Dad. The bank base rate is likely to come down at a slower pace than touted by economists last year. Warrick expects interest rates to start with a two within three to four years.
The housebuilding industry has been barracking for an incentive to young purchasers to replace the axed Help to Buy scheme. Marcus Dixon of JLL is optimistic.
One line in the Autumn Statement hints at a consultation between the Government and housebuilding industry discussing help for first-time buyers, he explains.
“My gut instinct is that we may see a replacement for Help to Buy in the spring Budget (on March 26),” says Dixon.
“If Labour want housing delivery by housebuilders and the private sector then they have to convince them there is a market. There needs to be demand-side incentive to get Britain building and buying,” he adds.
The Elizabeth line opened up disconnected and more affordable parts of London, such as Woolwich and Thamesmead. So, where should buyers look next?
- Transport for London has dusted off plans for the extension to the Bakerloo line, taking it to Lewisham and possibly to Beckenham Junction.
- The Government is to fund the creation of the HS2 tunnel from west London to a new transport hub at Euston, in a bid for a wave of redevelopment in Camden. Camden council remains tight-lipped but Euston Housing Delivery Group has been set up.
- Plans have been submitted for the Earl’s Court £10 billion overhaul. The much-delayed project will hopefully deliver 4,000 homes and public realm that will link to three Tube stations.