London House Building Collapses 84% in a Decade as Sales Plunge

The UK government is on course to miss its London housing targets by a wide margin after plunging new home sales led to a collapse in the number of new apartments under construction.

Just 5,547 homes were started in the UK capital last year, an 84% drop from a decade earlier, according to data compiled by researcher Molior London, which tracks home starts and sales in projects of a size of at least 20 homes. London needs 88,000 new homes a year, according to government estimates, but Molior’s data show just 14,053 homes are expected to be completed in 2027 and 2028 — a 92% shortfall.

The numbers highlight the challenge confronting the Labour government, which put building more homes at the center of its economic agenda when it came to power in July 2024. Soaring costs, lengthy planning delays and more stringent regulations in the wake of the Grenfell Tower fire in 2017 have upended the economics of development, sapping developer confidence and deepening the slump. Changing taxes have also discouraged buyers, constricting demand.

“Significant barriers to entry make it hard to become a London residential developer,” including expensive construction and weak demand, Molior researchers wrote Tuesday in a client report seen by Bloomberg News. “All buyer groups are largely absent from the market.”

Developers in the city sold just 2,463 new homes between October and December, the data show. That’s 32% lower than the same period last year.

Weak demand has contributed to a slump in construction that’s spanned the country. UK housebuilding dropped at the fastest pace since the first Covid lockdown in December, according to S&P Global’s purchasing managers’ index.

New London Home Sales Are in Decline

Source: Molior London

The government and London Mayor Sadiq Khan unveiled emergency measures in October to unlock development in the capital, including a reduction in the proportion of affordable homes developers must provide. Housebuilders started work on 2,294 homes in the final quarter of last year, more than double the previous quarter. Still, it’s well short of the 22,000 start rate needed to meet the government’s assessment of the capital’s housing need.

“The numbers are a sobering reminder of the ongoing challenges ahead,” said Tom Goodall, chief executive at developer Related Argent. “Instability and uncertainty are the enemies of investment — that is why the package of measures introduced late last year to stimulate the market was so important.”

Vistry Group Plc — one of the UK’s largest housebuilders — said last week it sold 9% fewer homes in 2025 after uncertainty driven by the UK budget created a “subdued market” in the second half of the year. Rival Taylor Wimpey Plc warned that the UK housing market continues to be blighted by lackluster demand as buyers struggle with elevated mortgage costs that have stretched affordability.

The Molior data spell out the misery facing London’s housing market as pricier borrowing and new regulations wreak havoc on demand. The vast majority of sales to individual owner occupiers last year were at prices in excess of £600 ($808) a square foot, effectively freezing out the lower rungs of prospective buyers.

That’s compromising the viability of some projects. Work had stopped on more than 5,000 homes within 51 development sites as of the end of December, according to the report. That was mainly driven by building contractor bankruptcies due to rising construction costs or work being halted as a result of weak demand.

“This excludes smaller developers from the industry, leaving a group of larger developers with limited competition from 2027,” the report said.

Article by Damian Shepherd for Bloomberg