Last month, a new account called London Price Drop appeared on X. It has already gained more than 14,000 followers simply by posting screenshots from Rightmove, which illustrate how properties in the capital are falling sharply in value.

One of these is a leasehold flat in Shepherd’s Bush purchased for £425,000 in 2017, before being re-listed for £395,000 in May 2024, and eventually sold for £325,000 last August. Adjusted for inflation, that represents a real terms loss of close to £250,000.

The London Price Drop account is so popular because it contradicts an assumption that many in Britain hold dear. Young or old, owner or renter, almost all of us believe that buying property is the route to wealth, and that house prices, in the long run, always go up. It’s scary and surprising then to discover that properties, especially flats, inside the M25 are losing their value so quickly.

We shouldn’t be shocked, though. The evidence has been clear for two decades: buying property in London is increasingly a mug’s game. In the capital, in the year to the end of January, prices have edged down in nominal terms (actual cash value, excluding inflation), falling by 1.7 per cent even as core inflation – which excludes energy and food – averaged 3.1 per cent.

This is not a brief stumble: in real terms the average increase in value of a property bought in London 20 years ago is 13.1 per cent. For context, if in 2006 an individual had put their money into an index fund tracking the US stock market, the investment would have increased by more than 300 per cent in real terms.

This phenomenon is not just taking place in London. House prices have fallen by 0.2 per cent since December 2025 across England. The North West of England is the only area of the country where house prices have risen at the same rate as inflation – but this still means that prices are stagnant.

In every other party of the country increases in prices have not kept pace with inflation. Deutsche Bank predicts that house prices across Britain could fall by up to 5 per cent this year alone.

No matter where you live in the country the old idea that by buying a house you are guaranteed to build wealth no longer holds true. It was true, however, in previous generations. After a crash in the early 1990s, house prices across the country doubled in value, in real terms, between 1996 and 2006. Anybody who has joined the property market after this point will have seen far less growth in the real terms value of their house.

But it is London, particularly in the last decade, where prices are not only stagnating but crashing. In that time, flats in London have lost on average 26.7 per cent of their value, with drops of more than 40 per cent for central locations. In the capital, there has been a correction in the housing market happening for some time. But because there has not been a sharp nominal drop, this correction has been mostly hidden from view.

Take another listing posted on London Price Drop: a leasehold flat in Kilburn, purchased for £825,000 in 2015. The buyer might well have been a millennial who had endured a difficult employment market after graduating. Defying the odds, scrimping and saving, or more likely with some help from the Bank of Mum and Dad, they were able to scrape together a deposit.

Ten years later, in 2025, the going rate for their property is £646,000. The declining value of their property leaves them stuck in negative equity. When the sums are adjusted for inflation, they have lost almost half a million pounds. Just to close the mortgage and realise this loss, they would have to repay the bank tens of thousands.

This is not theoretical. There are thousands of people caught in this trap, having made a financial mistake they cannot easily escape. This is especially bad for young people who bought properties through the Help to Buy scheme. Between 2013/14 and 2024/25 the percentage of flats bought through this scheme and then sold at a nominal loss rose from 25 per cent to 45 per cent.

Being stuck with a property that you are unable or unwilling to sell cheaply can freeze people’s lives. I have spoken to one family whose relocation to Australia is being hampered by their inability to sell their home in London. Because first-time buyers are becoming rarer, other parts of the housing market are also stuttering – you may have found a new home but cannot secure a buyer for your current property. In practical terms, this means that families who want a larger home so they can, say, accommodate more children, are stuck in limbo.

There is also a cost to developers from softer demand. New-build developers in London, far from finding that they have a large captive market of desperate young people, are finding that they cannot sell their newly built homes. They are being forced to chase new buyers through incentives such as free e-bikes and even deposit contributions with values of up to £15,000.

Buyers are right to be sceptical, especially as many new-build flats in London are burdened with large service charges and are likely to sell at a loss. The Telegraph has calculated that 37 per cent of new-build flats in Wandsworth borough bought after 2010 were sold from 2020 onwards at a cash loss. When adjusted for inflation, the number will of course be much higher.

Buying your first flat in London is no longer necessarily a rational economic decision, despite the wellbeing and security that owning your own home may bring. Purchasing a flat exposes buyers to variable mortgage costs and the eventual threat of negative equity, as well as inflation-sensitive costs such as home maintenance and service charges. For many people who want to live in London, it makes more sense to rent until they are ready to buy a family home outside of the city later in life.

London’s property market is so bad that Foxtons Group, one of London’s largest estate agents, has begun to cut jobs in its sales division; its share price has declined by 28 per cent since the start of the year.

Why is this happening? Several pressures are occurring simultaneously to depress the housing market. Many landlords have been trying to sell their flats and evict their tenants before changes in the Renters Rights Act take effect next month, which will make it impossible to issue no-fault evictions. Combined with other changes to how rentals are taxed, this has reduced the commercial viability of maintaining rental properties, lowering demand for buy-to-lets.

Another part of the story is that demand for property in London at the high end has also cratered. Perhaps international elites increasingly believe that London is sliding into crime, or that the country has lost its reputation as a laundromat for dirty international money since the British government imposed sanctions on Russians following the invasion of Ukraine. Certainly changes to the non-domiciled regime introduced by Jeremy Hunt and continued by Rachel Reeves have not helped.

Whatever the reason, the change is dramatic: the number of ‘high-value sales’ – properties worth more than £5 million – fell by more than 25 per cent in London between 2022 and last year.

Perhaps the biggest problem is that prospective buyers simply do not want to purchase leasehold flats, which comprise a third of properties in London, more than double the average in the rest of England. The leasehold system binds buyers to properties that they do not technically own and makes them liable for service charges and ground rents which they have little to no control over.

Successive governments have attempted to reform the leasehold system only to run headfirst into the institutional power of vested interests such as pension funds and landowners. Whatever the politics of leasehold reform, the end result is that buyers are unwilling to take on these liabilities. And because lenders are unwilling to provide mortgages for properties with particularly high service charges, sellers become stuck.

Even harder than selling a leasehold is trying to sell a flat with potentially combustible cladding. Changes introduced after the Grenfell tragedy have left tens of thousands of owners across Britain stuck in buildings that are considered unsafe, and as 61 per cent of all high-rise buildings in England are in London the problem is particularly acute here.

A mortgage is difficult without an EWS1 fire safety form. The government’s target for resolving this crisis is 2029, but the Public Accounts Committee has warned that the target may be missed. Until then many of these people are stuck, with their housing wealth effectively frozen and removed from the normal churn of London’s property market.

Buyers are also discouraged from purchasing a first flat by the structure of stamp duty. Because first-time buyers pay no stamp duty on purchases up to £300,000 and a lower amount up to £500,000, many prefer to reserve this benefit for a future family home, rather than ‘use it up’ on a smaller starter property. The result is that they skip the traditional first rung of the ladder altogether.

Another distortion is found in the structure of the Lifetime Isa (LISA). Young savers get a top-up from the government when they use these accounts to save for their first home, but they can only buy a property worth up to £450,000, a cap which was set when LISAs began in 2017. If they cannot buy within the limit (as many in London are unable to do), they face a 25 per cent penalty to withdraw the money, meaning they may be trapped renting or forced to look outside London to avoid this hit to their savings.

As bad as the picture already is, for those who own in London it is about to get much worse. Interest rates are likely to increase in the next year to tame inflation brought about by the blocking of the Strait of Hormuz and the concomitant energy price rises. After the US and Israel began attacking Iran, commercial banks withdrew 1,700 mortgage products – more than a fifth of those on offer, according to Moneyfacts – and the average two-year fixed rate mortgage jumped from 4.9 per cent to 5.9 per cent.

These sudden increases in mortgage rates are causing serious concerns about a housing meltdown. The spread of negative equity may create a new and increasingly aggrieved political constituency, even without a dramatic crash in the housing market precipitated by a spike in energy prices (as in 2008). Millennials who did everything they were told are now discovering that the rungs on the ladder lead down as well as up, and that they are poorer after being sold a false promise.

For years, Britain’s housing politics have been organised around those locked out: the renters, the would-be buyers and the excluded. There may be a new group within this generational cohort: if the old grievance was exclusion, now it is being locked in.