Collapse in London newbuild property revealed
Sales of new homes have fallen to record lows as affordability crisis, red tape, cladding rules and tax changes bite.
London’s newbuild housing market is in freefall, with sales plunging to their lowest level since the global financial crisis as developers abandon sites.
According to a new report just 3,946 new private homes were sold across the capital in the first six months of 2025, down 30% on last year, while in May only 19 new flats were sold citywide, the weakest month on record.
A combination of factors
And consultancy Molior warns that only 6% of the 176,000 homes pledged by Mayor Sadiq Khan over the next two years are likely to be built. There are a number of different factors behind the collapse: tighter planning rules, rising construction costs, and onerous requirements for a third of new homes to be sold at a discount.
Developers also say that the city’s strict post-Grenfell safety regime has added further delays and cost to construction, with the Building Safety Regulator now requiring extra approval stages for taller residential blocks and cladding compliance.
And affordability pressures are having a serious impact, too. The halving of the Stamp Duty threshold in April has raised purchase costs by around £7,000 on average, while first-time buyers now need deposits of £124,000 for an average £511,000 London home.
Demand for new housing has all but disappeared.”
BuiltPlace’s Residential Analyst, Neal Hudson (pictured), says demand for new housing “has all but disappeared” as prices, taxes and regulation combine to deter buyers. You need to sell flats upfront to unlock funding, but the demand simply isn’t there.”
Agents are warning that without renewed buyer appetite or planning reform, London’s new-build pipeline will continue to shrink, worsening the capital’s already serious housing shortage.
It would be interesting too to know if demand from overseas buyers and landlords has dried up too, because of the heavy taxation and regulation and the general hostility shown in media and local and central governments to these groups. These used to be valuable sources of pre-completion sales to encourage developers and their finance-providers to proceed with a project, but if they are now sitting on their hands because of the uncertain tax and regulatory situation, or have given up entirely, it’s going to make it even more difficult for developers to justify the risks of starting a build.