London’s housing market is no longer behaving like a growth asset. It is behaving like a maturing, highly financialised system that has reached its affordability ceiling.
The latest Hamptons data confirms what developers, lenders and planners have been seeing on the ground for over 18 months: a growing proportion of London homeowners are now selling at a loss, particularly flat owners who bought during the post-pandemic price surge.
This is not a temporary dip. It is a structural correction.
In 2025, 14.8% of London home sales completed below their original purchase price, the highest proportion in England and Wales. In boroughs such as Tower Hamlets, City of London, Kensington & Chelsea and Westminster, more than one in five sellers made a loss.
The losses are being concentrated almost entirely in the apartment market.
The Flat Market Has Broken Its Price Mechanism
Flats now represent:
- 60% of London property transactions
- 90% of all loss-making sales
This is not cyclical volatility, it is a pricing model failure.
For more than a decade, London flats were sold on a financial logic that no longer holds:
- low interest rates
- continuous capital appreciation
- international demand
- rental yield arbitrage
- speculative off-plan buying
That model collapsed in 2022.
What replaced it is a market defined by:
- high mortgage rates
- flat real wages
- tighter lending rules
- cladding remediation risk
- service charge inflation
- energy performance penalties
- falling overseas demand
The result is a liquidity freeze. Buyers cannot afford current prices, sellers cannot achieve past valuations and developers cannot underwrite new schemes. Transaction volume is falling and price discovery is now moving downward.
London’s Two-Speed Property Market
London no longer has a single housing market. It has split into two.
Houses
House owners are still achieving average gains of around 60% over a 10-year holding period. Family homes with gardens, transport access and energy efficiency remain highly liquid.
Demand remains strong because:
- households are prioritising space
- hybrid working has redefined location value
- family formation is pushing outwards
- rental pressure is pushing buyers into ownership
Flats
Flats are now behaving like depreciating assets and the flat sellers are six times more likely to sell at a loss than house sellers.
This is driven by:
- oversupply in inner zones
- investor exit
- build-to-rent competition
- safety remediation uncertainty
- service charge escalation
- weak first-time buyer affordability
The apartment market has lost its role as London’s entry point to ownership.
Why This Matters for Construction
This shift has direct consequences for London’s development pipeline.
The capital’s housing delivery model over the past decade was based on:
- high-density flatted schemes
- transport-led regeneration
- institutional investment
- off-plan funding
- forward-funded BTR
That model now faces a viability problem.
Developers are already responding by:
- delaying schemes
- reworking tenure mix
- increasing BTR share
- pivoting to suburban housing
- reducing unit density
- renegotiating planning obligations
This is why planning approvals remain high while starts are falling. The system is jammed between policy ambition and financial reality.
The Real Risk: A Lost Development Cycle
If pricing does not reset, London risks entering a prolonged delivery slowdown.
That would mean:
- fewer starts
- stalled regeneration
- shrinking SME developer base
- rising construction insolvencies
- supply contraction into the 2030s
Which would then push rents even higher and deepen the affordability crisis. The correction phase is necessary, but if unmanaged, it becomes destructive.
What Comes Next
The London housing market is now in a recalibration cycle.
This will involve:
- price compression in inner-city flats
- stronger suburban house demand
- rising BTR dominance
- smaller private development pipelines
- greater reliance on public-sector land
- more modular and low-cost delivery models
The era of London property as a guaranteed wealth engine is over.
The next decade will be about:
- affordability
- functionality
- efficiency
- liveability
- long-term occupation value
Not speculation. London is not experiencing a housing crash, it is undergoing a structural market reset and the construction sector will have to rebuild its delivery model around a very different buyer.
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Expert Verification & Authorship: Mihai Chelmus
Founder, London Construction Magazine | Construction Testing & Investigation Specialist |
