Jonathan Swead
London’s housing market is undergoing one of its most difficult periods in recent memory. The capital is seeing a pronounced slump in new home construction and sales, a London new homes slump that is reshaping choices for buyers, squeezing developers and slowing housebuilding across boroughs.
We have analysed the most recent data (latest figures to Q4 2025), spoken with market experts and reviewed government responses to explain what the crisis means in practical terms. Below we set out the key figures, the drivers behind the decline and what stakeholders can expect next.
Headline figures: in 2024 London completed 32,000 homes, roughly 36% of an 88,000‑a‑year need commonly cited in planning discussions. That completion total represents about a 30% fall versus 2020 levels, highlighting a sustained weakening in new build delivery rather than a short-term blip. (Sources: GLA housing supply publications, Land Registry, see data section.)
This downturn is not a one‑off month or quarter: the data show a sustained London new homes slump that has eroded delivery and sales over several years. Below are the headline numbers (data to Q4 2025 unless otherwise stated) and the trends they reveal.
Sales (new build): Land Registry and GLA transaction datasets show new home sales collapsing in parts of the capital. For example, reported new home transactions in one June fell to just 26 recorded sales in the Land Registry sample used, a dramatic fall compared with typical monthly volumes in previous years. (See source notes below.)
Starts and sites: New home construction starts are reported to be down materially, industry surveys and GLA starts series indicate falls in the order of the 50–60% range compared with pre‑slump years, reflecting both fewer planning consents progressing to site and paused projects on active sites.
Costs vs values (forecast): Independent construction indices and market forecasts published in 2025 suggested that tender price inflation in London could rise faster than house prices over the coming years (examples cited in industry commentary ranged up to c.27% tender inflation versus c.15% house price growth in some scenarios). These are forecasts and should be treated as indicative, see RICS/BCIS/GLA sources for methodology.
Investor appetite for London new build has weakened significantly. Analyses of purchaser profiles show investor purchases of new homes have fallen sharply since the mid‑2010s; some datasets indicate falls approaching 90% in small-sample comparisons versus 2014. The capital has lost billions of annual investment that previously supported off‑plan sales and cashflow for developers.
Institutional capital has increasingly targeted regional cities: recorded investment into major regional new build schemes rose from low hundreds of millions in the mid‑2010s to several billion in later years, while London has experienced a relative decline in the same period.
Month after month, the numbers have confirmed a downward trend: completions and starts have fallen quarter on quarter through 2024 and 2025 in many boroughs. The slump spans high‑end central schemes and affordable‑led projects in outer London alike.
Key statistics (summary): London is commonly estimated to need c.88,000 homes a year to meet demand; in 2024 around 32,000 homes were completed (GLA/ONS data). Construction starts are materially down (reported falls in the c.50–60% range in industry sources). Investor purchases and off‑plan sales have dropped sharply since 2014, creating an estimated multi‑billion‑pound annual funding gap for delivery.
What’s Driving the London New Homes Slump?
Several interconnected forces have combined to create the current London new homes slump. Below we set out the principal drivers and how they interact from regulation and policy to costs, planning and land economics, so readers can see why delivery has contracted so sharply.
Ministers and the Greater London Authority have introduced and debated a series of measures to blunt the downturn. Sadiq Khan and national government ministers have both signalled London‑specific interventions, from targeted funding for stalled sites to proposals for planning reform but the timing and detail of these measures vary. Where schemes are already marginal, developers say emergency measures, while welcome, may arrive too late to rescue projects that are now unaffordable.
Practical note: track announcements closely, an emergency financing pot or explicit underwriting of remediation costs can change viability overnight for certain schemes.
Since the new building safety regime following Grenfell, developers face higher compliance costs, longer inspection timetables and additional design work. These necessary measures increase upfront expenditure and extend programme timelines, squeezing project margins and delaying handovers.
Fire safety upgrades, higher structural standards and new inspection regimes add both cost and time to build, industry estimates from 2024–25 placed these uplifts as a material proportion of total scheme cost, contributing directly to the reduction in starts observed on many sites.
Lengthy planning approval times remain a major brake on housebuilding. Applications can wait months or years for decisions; during that period costs rise and market conditions shift. Local authority resourcing pressures and increasing application complexity have reduced the throughput of viable schemes.
As a result, fewer approved schemes progress to start, and the lead time between consent and site commencement has extended in many cases.
With development margins compressed, many landowners now value sites more highly for alternative uses, logistics, PRS or hospitality, or simply hold onto land rather than sell into an unviable market. Current viability assessment mechanisms can discourage land release, creating a supply bottleneck that feeds back into rising house prices in the medium term.
The net effect is a vicious cycle: constrained land supply limits potential new build numbers, which keeps pressure on prices and reduces the incentive to bring forward more sites.
Traditionally, private sales cross‑subsidised affordable housing in mixed developments. With private sale prices lagging cost inflation in many sub‑markets, that model has broken down in numerous schemes, developers cannot reliably generate the surplus needed to deliver required affordable units.
Registered Providers have signalled reductions in some procurement volumes, and viability negotiations under Section 106 continue to be a flashpoint, all of which reduces the pipeline of affordable homes that would previously have been delivered through cross‑subsidy.
Developers are revising tenure mixes, exploring build‑to‑rent or institutional forward‑sale models, and seeking alternative subsidy routes to preserve delivery where possible.
Recent tax and policy shifts have reduced returns for residential development. Stamp duty adjustments, corporation tax changes and new levies (for example, developer‑facing levies introduced since 2023) all factor into scheme viability. Late‑stage viability reviews and changing policy expectations add uncertainty for developers and landowners alike.
CIL, MCIL, carbon offset requirements and building‑safety related levies now represent a material policy‑driven cost that must be built into early viability work.
London‑specific design and quality standards increase build costs compared with similar schemes outside the GLA boundary — a trade‑off between higher quality and tougher viability tests.
Section 106 obligations and other infrastructure contributions add upfront costs before any sales revenue is realised, increasing the funding gap for many schemes.
The London new homes slump does not affect everyone the same way. Buyers, developers, construction firms, investors and estate agents each face distinct pressures, and each can take different tactical steps to protect value or find opportunity in this difficult market.
Buyers face reduced choice as fewer new homes come to market; the schemes that do proceed often skew towards higher price points as developers prioritise viability. Mid‑market and entry‑level buyers therefore find fewer suitable new build options.
First‑time buyers are particularly affected: Help to Buy and other early‑purchase support have been scaled back in many places, and shared‑ownership availability within new developments has tightened. That reduces the number of routes onto the housing ladder via new builds.
Opportunities do exist. With sales volumes down, some developers offer incentives, staged payment plans or negotiation on upgrades. Buyers who work with an expert adviser can access off‑market opportunities, negotiate better terms and request detailed viability information before committing to purchase.
Developers face existential choices. Smaller firms with limited balance sheets are most exposed and some have withdrawn from London or refocused activity on regional markets where returns are comparatively stronger. Larger firms holding land banks face a dilemma: develop at a loss, write down land values, or wait for conditions to improve.
Many developers are adapting, shifting from build‑to‑sell to build‑to‑rent models, partnering with institutional capital to de‑risk schemes, or revising tenure mixes to improve viability. Those able to innovate and access patient capital are best positioned to survive the downturn.
Construction firms are seeing pipelines thin: fewer starts and more paused sites reduce available work. That intensifies competition for remaining projects and squeezes margins for contractors and sub‑contractors.
Skilled labour is shifting to regions with more active work, risking a talent drain that could hinder capacity to ramp up when the market recovers. Firms that retain specialist crews and diversify their service offering will be better placed when sites reopen.
Investors are reappraising London exposure. Buy‑to‑let returns have been affected by tax and regulatory changes, and new build premiums are less certain than before. That pushes some private investors to wait or seek opportunities in stronger regional markets.
For those with capital, current conditions create distressed and tactical opportunities: completed stock or part‑finished developments may be available below replacement cost. Institutional investors, meanwhile, take a longer view, recognising London’s structural housing shortfall and positioning for future value when supply tightens.
Estate agents focused on new homes see fewer developer referrals and reduced transaction volumes. Many are diversifying into resales, lettings or regional markets. Agents who offer genuine market intelligence, negotiation support and access to off‑market schemes can build stronger client relationships in this environment.
We specialise in London new homes and understand this market better than most. Our non‑corporate, flexible approach means we work for you, not developers. We provide honest, practical guidance that helps buyers, investors and developers make decisions aligned to current market realities.
The London new homes slump will not last indefinitely, but recovery is likely to be gradual and uneven. Understanding short‑, medium‑ and long‑term scenarios, and the indicators that signal change, helps buyers, developers and investors prepare and act at the right times.
Expect continued weakness in the immediate term. Construction starts and completions are likely to remain subdued as schemes approved in stronger market conditions reach increasingly marginal viability. Consolidation among smaller firms will accelerate, and some sites will remain paused while owners await clearer economics.
For buyers and investors, this period typically brings tactical opportunities: incentives, negotiated discounts and quicker decision windows where developers need to free up cash or hit sales milestones.
Assuming targeted government measures and planning reforms begin to take effect, the medium term could see a gradual pick‑up. Measures such as targeted underwriting of remediation costs, streamlined planning processes and time‑limited financing support would improve project viability for many stalled developments.
Construction inflation should moderate as supply chains adjust and tender markets normalise; house price growth could pick up if supply remains constrained, narrowing the gap between costs and values and making more schemes viable.
London’s structural housing shortage means long‑term demand remains intact. Over three to five years, supply constraints could re‑assert themselves, pushing new build schemes that are completed in that period to command premium pricing. Strategic buyers and long‑term investors who position appropriately now may capture significant upside when sentiment recovers.
Technology and modern methods of construction (MMC) may also play a role in the long term by reducing build time and, in some cases, cost, though adoption depends on policy support, skills availability and developer appetite to change delivery models.
Government and city authorities acknowledge the urgency. Sadiq Khan and national ministers have proposed a mix of emergency and structural measures, from one‑off funding for stalled sites to planning and viability reforms. The precise form and timing of these measures will determine how quickly housebuilding and starts recover.
Market recovery indicators to watch: planning application volumes and decision turnaround times, a fall in construction cost inflation (BCIS/RICS indices), return of investor capital into London schemes, public announcements of targeted emergency measures, and house price growth outpacing build cost inflation.
Reduced competition can create negotiating power: incentives, price concessions and enhanced warranties are more common in depressed markets. Smart buyers secure favourable terms and superior long‑term value.
Counter‑cyclical land acquisition at suppressed prices, repositioning to build‑to‑rent or partnering with institutional capital can position firms strongly for recovery. Investing in MMC capability now can also reduce future build timelines and costs.
Distressed sales and forced disposals can offer buying opportunities below replacement cost. Patient capital that performs rigorous due diligence can generate market‑beating returns over a full cycle.
Final Thoughts: Navigating the London New Homes Landscape
The London new homes slump is a major test for the capital: falling construction activity, weaker new build sales and mounting pressures across the development and sales chain. Yet every market disturbance creates opportunities for those who understand the data, the drivers and the timing of recovery.
Key figures referenced in this briefing (GLA/ONS/Land Registry sources) show that completions in 2024 were around 32,000 homes against commonly quoted needs of c.88,000 a year; starts and investor purchases have fallen sharply in recent years. These numbers help explain why developers, construction firms and buyers face such acute choices today.
The causes are interconnected: building safety and other regulatory costs, planning delays, revised tax and levy regimes, squeezed land economics and the breakdown of cross‑subsidy models. Together they have reduced the number of viable new build schemes and raised the bar for successful housebuilding in London.
What you can do next, a short checklist:
Data and circumstances change quickly, this briefing is accurate to the latest publicly available data to Q4 2025. For a tailored discussion, download our 2026 London New Homes Market Brief or contact us for a one‑to‑one consultation.
At Stone.london we combine practical market experience with up‑to‑date data to help buyers, investors and developers make informed decisions. Whether you need short‑term tactical advice or a long‑term strategy, we provide clear, actionable guidance.
