London’s Housing Pipeline Faces Fall as Construction Slows

London’s homebuilding machine is grinding toward a standstill.

Data suggests the number of homes under construction in the U.K. metropolis could drop to just a quarter of typical pre-pandemic levels by early 2027 as weak demand, rising costs and tighter regulations strangle the market, Bloomberg reported.

Only 15,000 to 20,000 homes are expected to be in active construction by the beginning of 2027, down from about 60,000 to 65,000 during the five years before Covid, according to Molior London. The research group said sluggish sales have sapped developers’ confidence and made government housing targets “impossible to achieve.”

The report underscores the scale of the slowdown despite Prime Minister Keir Starmer’s pledge to jumpstart residential construction. Between July and September, London developers sold fewer than 2,000 new homes, a 19 percent year-over-year drop and near the lowest level since the 2008 financial crisis.

Bellway Plc, one of the U.K.’s biggest homebuilders, warned this week that affordability pressures and uncertainty over potential tax changes have further dented buyer appetite.

The slump in sales of spec homes has added to the malaise. Only 31 percent of new homes were sold before completion last year, the lowest share since 2012, as higher property taxes and pricier borrowing drove investors from the market.

Developers rely on those early deals to obtain bank loans and lenders have grown increasingly cautious of backing projects without significant pre-sales.

Construction starts tell the same story: slightly more than 3,200 private homes broke ground through September, putting London on track for fewer than 5,000 starts this year, compared with more than 15,000 in both 2021 and 2022. About 5,300 partially built units are currently stalled, further clogging the pipeline.

Molior estimates the total number of homes under construction could halve again by 2027 unless the government cuts development costs and revises stamp duty.

The average London home sells for roughly $666,000 — nearly $800 per square foot — pricing out many would-be buyers and chilling the lower end of the market. Without policy relief, the city’s housing shortage looks set to deepen as demand begins to recover.

— Holden Walter-Warner