These are the three London areas where house prices fell in January

Helen Cahill
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Tony Blair's New London Home
Stamp duty tax is changing the capital's property market (Source: Getty)

House prices are steadily climbing in most parts of the capital - but tax changes on high-end homes have been pushing down values in the city's most central locations.

According to data from Hometrack, there were three local authority areas in London where house prices fell year-on-year in January:

London local authority House price change y-o-y Average house price
Kensington and Chelsea -3.3 per cent £1,281,400
Hammersmith and Fulham -1.3 per cent £765,600
City of Westminster -0.3 per cent £986,400

These are the parts of London which have been hit hardest by former chancellor George Osborne's stamp duty reforms. He raised the tax rates for people buying homes worth more than £1m, leading to price reductions on some of the capital's most expensive properties.

Guy Meacock, director of buying agency Prime Purchase, said that the prime central London housing market had contracted "considerably" since stamp duty rates were raised in 2014.

Read more: The Chelsea house price plunge: here's how low prices will go

He said it was taking a long time for vendors to get their heads around the "unprecedented" changes to the costs faced by buyers, but that they were becoming more realistic with prices.

Samuel Tombs, chief UK economist for Pantheon Macroeconomics, said:

I expect prices in central London to continue to struggle.

Employment growth in the City likely will remain weak, meaning that the market remains over-supplied with high-end flats. Concerns that sterling would fall further if the UK went down a hard Brexit route also likely will linger right until the end of the UK’s two year negotiating period, making overseas buyers reluctant to purchase homes.

House price growth was fairly sluggish in Camden, and Richmond up Thames, where house prices grew by 1.4 per cent and 1.6 per cent respectively in January.

There has been more impressive growth in the more affordable parts of the capital:

London local authority House price change y-o-y Average house price
Havering 9 per cent £354,000
Gravesham 8.1 per cent £283,200
Broxbourne 8.1 per cent £350,400

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