London's new-build housing market has reached an extraordinary position: thousands of newly completed homes are struggling to find buyers at the same time as the pipeline of future construction is shrinking rapidly. Molior data reported in August shows that 5,606 new-build homes were sold in London during the first six months of 2026, compared with 8,840 in the same period last year, a fall of almost 37%. The market is now carrying a record 4,629 unsold new homes with an estimated value of around £3.5 billion.
But the bigger construction risk may sit beyond the current sales slump. Some 56 developments have already been paused with 3,913 homes mid-completion, while around 70% of homes currently under construction are expected to complete by the end of 2027. On current projections, only around 8,750 homes could still be under construction in January 2028.
LCM assessment: London does not simply have too many new homes. It has too many homes at prices and ownership costs that the present market is struggling to absorb. Developers are responding by delaying new starts. That means today's £3.5bn inventory problem could become tomorrow's construction and housing-supply problem once the existing pipeline completes.
Jump to: Key figures | Why buyers disappeared | The construction pipeline | Why 2028 matters | Contractor impact | What could change | LCM verdict
London New-Build Market: The Numbers Behind the Warning
| Indicator | Latest Position | Construction Reading |
|---|---|---|
| H1 2026 new-build sales | 5,606 homes, down almost 37% from 8,840 in H1 2025. | Weak sales reduce developer cash recycling and confidence in launching subsequent phases. |
| Completed unsold homes | 4,629 homes worth an estimated £3.5bn. | Capital remains locked in completed stock rather than being recycled into new development. |
| Paused developments | 56 schemes containing 3,913 homes mid-completion. | Weakness has moved beyond future projects and into live construction sites. |
| Private starts in 2025 | 5,547 homes, compared with 33,782 in 2015. | An 84% fall over a decade has already removed much of the replacement pipeline. |
| January 2028 forecast | Around 8,750 homes potentially remaining under construction. | The current completion wave risks being followed by a severe fall in active residential workload. |
Why Are London Buyers Walking Away From New Builds?
The immediate problem is affordability. London buyers are combining high purchase prices with large deposits, mortgage rates still far above the ultra-low levels of the early 2020s and substantial transaction costs. The Bank of England's Bank Rate remains at 3.75%, meaning financing conditions have improved from their peak but remain restrictive for highly leveraged buyers. The disappearance of Help to Buy has also removed an important route into the London new-build market. At the same time, service charges on high-density developments, leasehold concerns and the ongoing cost of maintaining amenity-heavy apartment buildings have increased the difference between the headline purchase price and the true cost of ownership.
Investors have also become less dependable as a source of early sales. Higher financing costs, tax changes and weaker rental yields after service charges have reduced the attraction of buy-to-let and off-plan purchases. That matters because early investor sales traditionally helped developers demonstrate demand and unlock development finance before later phases were built. There is another problem: competition from London's existing housing stock. Molior director Tim Craine has highlighted investors selling apartments bought five to 15 years ago at prices around 20% below comparable new-build homes. In Canary Wharf alone, around 1,000 second-hand new-build apartments were reported to be on the market.
A buyer comparing a discounted five-year-old apartment with a newly completed unit can therefore face a significant price difference for broadly similar accommodation. Developers cannot always close that gap because land, finance, labour, materials, planning obligations and regulatory costs establish a minimum viable selling price. This demand problem reinforces the warning identified in LCM's earlier analysis, London Housing Starts Collapse to 7% of Target as Buyers Step Back, which examined how weak buyer demand was already feeding directly into construction starts.
The Sales Collapse Is Becoming a Construction Pipeline Problem
Housing development operates with a long delay between market conditions, construction starts and completed homes. Projects being handed over during 2026 were often funded, designed and started when conditions were very different. The important leading indicator is therefore not how many cranes are visible today. It is how many replacement schemes are starting behind them.
JLL's review of the London housing market records just 5,547 private-sector starts during 2025, down from 33,782 in 2015. The fall of approximately 84% explains why the current volume of construction cannot simply be assumed to continue. London can therefore have a large stock of unsold completed homes and still be heading towards much lower future supply. The two conditions represent different points in the same development cycle.
The mechanism is straightforward: weak sales create unsold stock → unsold stock traps developer capital → developers delay new phases → construction starts fall → today's projects complete without equivalent replacements → future supply and contractor workload contract.
This fits the broader pattern identified in London Construction Market Signals: July 2026. London is not experiencing one uniform construction cycle. Strongly funded infrastructure, retrofit, remediation and selected residential schemes can move while speculative or marginal housing remains stalled.
Why January 2028 Could Become the Real Pressure Point
Molior's projection that only around 8,750 homes could remain under construction by January 2028 is the figure that matters most to the construction industry. Around 70% of homes currently being built are expected to complete before the end of 2027. Unless sales recover sufficiently to trigger another wave of starts, London could enter 2028 with a dramatically smaller active residential construction market.
That creates an unusual sequence. During 2026, developers may still need to discount or incentivise completed homes because there is too much stock relative to effective demand. By 2028, however, the capital could have far fewer new homes reaching the market because so little replacement construction was started during the downturn.
LCM has already examined a separate policy-driven 2028 risk in London Housing 2028: The Upcoming Shockwave Nobody Is Ready For. The draft London Plan introduces another major transition around that period, meaning weak private starts, changing affordable-housing policy and development viability could converge at roughly the same time. The draft London Plan identifies capacity for 558,000 homes during the decade to 2037. But planning capacity and physical construction are different measures. Sites still require finance, viable sales assumptions, infrastructure, regulatory approval, contractors and buyers before policy capacity becomes completed housing.
What This Means for Contractors and the Supply Chain
For contractors, the immediate risk is not simply fewer residential tenders. It is instability inside the projects that already exist.
Paused sites increase commercial exposure: 3,913 homes sitting mid-completion across 56 developments can create demobilisation costs, payment uncertainty, programme extensions and supply-chain disruption.
Fewer starts reduce future order books: structural frames, façades, MEP, fit-out and specialist packages depend on projects progressing beyond planning and enabling works. A missing start today becomes missing subcontract workload later.
Competition for viable projects may intensify: contractors carrying residential capacity may chase a smaller number of funded schemes, increasing pressure on tender margins and risk allocation.
A later recovery could create another problem: if housing demand returns after contractors, subcontractors and skilled workers have left the residential market, the next development cycle may encounter reduced delivery capacity and renewed tender inflation.
This is consistent with the wider two-speed market described in The Stories That Defined London Construction in the First Half of 2026, where housing weakness contrasted with stronger infrastructure, prime refurbishment and strategically funded projects.
Could the 2028 Supply Shock Still Be Avoided?
The forecast is not inevitable. Falling mortgage rates, stronger wage growth, targeted buyer incentives or changes to Stamp Duty could improve absorption. Developers could then restart phases that are currently delayed. Public investment, affordable-housing funding and institutional build-to-rent could also replace part of the private-sale pipeline. There are already some positive signals. London recorded a sharp increase in NHBC registrations during Q2 2026 and Building Safety Regulator approval performance has been improving. These indicators suggest that parts of the residential market remain capable of restarting where funding, regulation and demand align.
But neither indicator removes the core commercial problem. A registered home still requires finance and construction, while regulatory approval cannot make an apartment affordable to a buyer or profitable to a developer. For a wider view of the capital's mixed outlook, LCM's London Construction Market Trends 2027 examines why stronger infrastructure and commercial activity can coexist with continued weakness in private residential delivery.
LCM Verdict: Today's Housing Glut Could Create Tomorrow's Shortage
London's new-build crisis is increasingly a question of timing rather than a simple argument about whether the capital has too many or too few homes. Today, the market has too much completed new-build stock relative to the number of buyers willing or able to purchase it at current prices. That has created a record £3.5bn inventory, pushed schemes into suspension and weakened the economics of further starts.
But construction reacts slowly. The developments completing through 2026 and 2027 were largely created by decisions made years earlier. The projects that should replace them are the schemes now being delayed. If that replacement pipeline remains weak, the current oversupply of expensive new-build apartments could be followed by a shortage of new housing entering the market just as today's inventory is finally absorbed.
Final LCM assessment: The £3.5bn of unsold London new homes is the visible problem. The less visible risk is the construction that is no longer starting behind them. If sales and viability do not improve materially during 2026–27, January 2028 could expose how quickly a housing glut can turn into a housing and construction supply shock.
Sources and methodology: This article is based on the latest Molior London residential development data reported by the Evening Standard, together with JLL's London housing analysis, Bank of England monetary-policy data and the 2026 Draft London Plan. Sales, unsold-stock, paused-development and January 2028 pipeline figures are attributed to Molior. Planning capacity, housing starts, sales and homes under construction measure different stages of the development cycle and should not be treated as interchangeable. Commentary labelled as LCM assessment or construction reading is editorial analysis of those published figures.
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Expert Verification & Authorship: Mihai Chelmus
Founder, London Construction Magazine | Construction Testing & Investigation Specialist |
