London house prices fall while the rest of the UK rises: what it means for downsizers

The regional picture

ONS and HM Land Registry data for May 2026 shows UK house prices growing at 2.7% annually to an average of £271,000 — a positive picture at the national level, though slower than the 3.9% recorded the previous month, largely due to the base effect of the April 2025 Stamp Duty rush. Below the headline, the regional variation is sharp.

London is the only English region recording an annual fall: prices dropped 3.4% in the year to May 2026 to an average of £589,500, with a monthly decline of 1.2% in May alone. The falls are most pronounced in higher-value central boroughs, though the weakness has spread more broadly than in the earlier phase of the correction. This is now the ninth consecutive month in which London has recorded an annual price decline.

The picture outside London is markedly different. Yorkshire and the Humber grew 4.1% to an average of £238,300. The North West rose 3.8% to £250,300. The West Midlands grew 3.5%. Wales rose 4.2% to £215,000, Scotland 4.4% to £196,000, and Northern Ireland 7.4% to £198,000. England overall, including London, grew 2.3% to £292,000 — but strip out the capital and the picture for the rest of England is considerably more positive.

What this means if you are considering downsizing from London

For a London homeowner who has been thinking about downsizing — selling a larger family home, perhaps one that feels too big now children have left, and moving to a smaller property either in London or elsewhere — the current market introduces considerations that would not have applied two or three years ago.

Selling into a declining market means accepting a lower price than would have been achievable at the 2022 or 2023 peak. How significant that is depends on how long the homeowner has held the property and what they originally paid. For most long-standing London homeowners, the property has still appreciated substantially even after recent falls — a property bought in 2005 for £400,000 that peaked at £700,000 and is now valued at £650,000 has still more than doubled. But the difference between selling at £700,000 and £650,000 is real, and timing a sale in a declining market rather than waiting for stability involves a judgement about which way prices move next.

If the downsizing destination is outside London — a common move for later-life homeowners seeking lower running costs, proximity to family, or a change of pace — the dynamic is different. Buying in Yorkshire, the North West, or Wales at a time when those markets are growing means purchasing into a rising market with the proceeds of a sale in a softening one. That can work in the homeowner’s favour if the purchase is made quickly after the sale, or create complications if the transaction takes time and regional prices continue to diverge.

The alternative: staying put and releasing equity

For homeowners who want to access some of the value in their property but are uncertain about selling into the current London market, the alternative is releasing equity without moving. A lifetime mortgage allows a homeowner to access a tax-free lump sum (or drawdown facility) based on the property’s current value, while continuing to live in it. The equity release amount is based on a valuation at the time of the application — which, for most long-standing London homeowners, is still very substantial even after recent price falls.

This option is not about timing the market. It is about separating two decisions that are often conflated: accessing property wealth and choosing when or whether to move. A homeowner who releases equity now does not have to sell the property; they can still downsize later when the market or their personal circumstances make it the right moment. The equity release sits alongside the property, not instead of it.

Whether staying and releasing equity, downsizing within London, relocating out of London, or waiting to see how the market develops is the right approach depends entirely on the homeowner’s individual situation — their financial position, health, family circumstances, and what they actually want from the next phase of their life. The data simply provides useful context for thinking through the options.

“A softer London market does not make downsizing the wrong choice — but it does make it worth understanding all the alternatives before deciding.”