- London is building far fewer homes than needed to meet targets.
- Falling demand and weak sales are slowing construction activity.
- Developers are holding back as financing becomes harder to secure.
London’s housing crisis is no longer just about supply. It is beginning to look like a demand and financing problem rolled into one, and that is where Sadiq Khan’s housing ambitions are running into trouble.
Fresh data suggests the capital is nowhere near the pace required to meet the Mayor’s target of building 88,000 homes a year. Just 2,103 private new-build homes were started in the first quarter of 2026, according to market analysts Molior. To stay on track, London would need roughly 22,000 starts every quarter, a gap that is becoming harder to ignore.
Even with a slight improvement from last year’s quarterly average of 1,397, the broader picture has not shifted much. Construction activity remains subdued, and the pipeline of homes under development is far thinner than what is required to sustain long-term delivery.
A market that has stopped moving
The slowdown is not only about planning delays or policy constraints. The bigger issue seems to be that buyers are stepping back.
Only 2,838 homes were sold in London in the first three months of 2026. That is a sharp drop from 8,586 homes sold in a single quarter in 2015. Analysts say falling prices and wider economic uncertainty are making buyers cautious, particularly when it comes to off-plan purchases.
Without those early commitments, developers struggle to secure bank financing. As Molior founder Tim Craine reportedly said in a news report, “No incentive to buy off-plan… and with zero off-plan buyers, you get zero construction from anyone that needs to get debt from the bank.”
That dynamic is starting to feed into the construction cycle. Fewer buyers mean fewer projects getting funded, which in turn leads to fewer homes being built.
Targets meet ground reality
By the end of March, around 36,735 homes were under construction across London. Analysts estimate the city would need closer to 225,000 homes actively being built at any given time to meet the 88,000 annual completion target.
Craine reportedly said London may have a “natural delivery rate” of about 20,000 homes a year, far below official ambitions. Even the existing stock of roughly 300,000 planning permissions may not offer much comfort, as many are outline approvals that are unlikely to translate into immediate construction.
There are also early signs that the slowdown could deepen. Projections suggest that by early 2028, the number of private homes under construction could fall to just 5,889.
Meanwhile, house prices are showing signs of softening. Halifax data points to an average decline of 1.2 per cent in London, while Deutsche Bank has warned prices across the UK could fall by up to five per cent this year.
UK housing market iStock
Efforts have been made to revive activity. The affordable housing requirement in London has been reduced from 35 per cent to 20 per cent in an attempt to make projects more viable. The government has also indicated it is working to unblock stalled sites and push more homes into the pipeline.
A spokesperson for the Ministry of Housing said the government is taking steps to “get spades in the ground” and restore access to homeownership, as quoted in a news report.
Still, the underlying issue appears more structural than regulatory. Developers are cautious, lenders are selective, and buyers are waiting.
For now, London’s housing market seems caught in a loop — where homes are not being built because they are not being sold, and not being sold because the market lacks confidence.
