Two large London housing schemes were paused within days of each other in October 2026, but the deeper problem is visible well beyond Canada Water and Lewisham. London new-build prices were down 6.5% year on year in the latest official split, residential starts have fallen sharply and developers are trying to sell homes into a market where buyers have more negotiating power but still face high deposits, mortgage rates and rents.
LCM's analysis of Greater London Authority data finds that recorded residential starts fell 55.8%, from 48,962 in 2022/23 to 21,665 in 2024/25. The GLA also identified about 48,000 homes with permission on sites that had not started at 2024/25, equivalent to just over 2.2 years of starts at the 2024/25 rate. Planning permission is still being secured; converting it into construction has become the harder part.
New-build residential towers in Woolwich, London, photographed in April 2026. Photo: London Construction Magazine
Prices have softened, but London is not cheap
The UK House Price Index for August 2026 puts the average London home at £554,430, down 2.2% in a year. LCM calculates that this is 2.6% below the recent £569,000 peak recorded in July 2025.
Apartments are taking more of the pressure. London flats and maisonettes fell 5.0% year on year to £427,000 in August. The latest reliable building-status split, for June 2026, puts the average London new-build transaction at £475,340, down 6.5%, compared with £554,928 for an existing property, down 2.8%.
That does not mean a first-time buyer looking back to 2023 sees a cheaper market. The official average London first-time-buyer price was £460,990 in August 2023 and £473,000 in August 2026. LCM calculates a 2.6% increase across those three years.
| LCM affordability comparison | August 2023 | August 2026 |
|---|---|---|
| Average London first-time-buyer price | £460,990 | £473,000 |
| Bank of England 95% LTV two-year fixed rate | 6.93% | 5.52% |
| 5% deposit | £23,050 | £23,650 |
| Illustrative 30-year monthly repayment | £2,893 | £2,557 |
Lower mortgage rates therefore make the same type of highly leveraged purchase cheaper to service than during the 2023 rate spike, with LCM's illustrative repayment falling 11.6%. But the buyer still needs a slightly larger deposit and is buying at a higher average first-time-buyer price. The ONS put the average London private rent at £2,338 a month in September 2026, which continues to absorb income that could otherwise build a deposit.
Buyer leverage now reaches the development appraisal
The sales market is feeding directly into decisions on whether the next phase of a scheme gets built. Savills reported in October that only 41% of London new-build sales, excluding Build-to-Rent, went to individual UK buyers in the first half of 2026, down from 53% a year earlier. Bulk sales and switches into affordable housing accounted for 40%, up from 22%.
That is a material change in how developers clear stock. Savills' Q3 land-market research says developers are concentrating on delivering and selling existing stock, while new-build sales rates remain under pressure. Sales incentives are still being used to secure purchases.
The evidence does not support a simple argument that buyers have rejected new homes because they are badly built. The Home Builders Federation's 2026 national customer survey found 93% of participating new-build buyers would recommend their builder and 90% were satisfied with their home and the buying service. The shift is more commercial: when borrowing remains expensive and competing stock is available, buyers can be more selective over price, specification, running costs, service charges and completed quality.
The building is getting dearer while the flat is getting cheaper
Construction costs have not followed London apartment values down. The BCIS Private Housing Construction Price Index recorded annual housebuilding cost inflation of 3.3% in the second quarter of 2026. Its broader General Building Cost Index was running at 4.3% annually by the third quarter, while tender prices rose 3.2%.
That gap is difficult for an apartment scheme to absorb when the latest London new-build sale price is already 6.5% lower than a year earlier. A developer cannot automatically pass another increase in concrete, MEP, façade, labour, insurance or finance costs into the selling price if buyers are already resisting the existing price.
The Home Builders Federation, which represents the industry, estimates that taxes, regulation and inflation introduced or accumulated since 2020 can add £76,000 to the cost of a typical new home, rising to a potential £98,000 for high-rise housing. Those figures are industry estimates and will not apply equally to every project, but they show why high-density London housing is more exposed than a straightforward low-rise site.
A permission can sit still for years
The GLA's planning data shows why counting permissions alone gives an incomplete view of supply. Residential starts dropped from 48,962 in 2022/23 to 27,386 in 2023/24 and 21,665 in 2024/25. Around 48,000 homes had permission on sites that had not started at 2024/25.
Gateway 2 is another pre-construction gate for higher-risk buildings. The latest Building Safety Regulator data, correct at 5 October 2026, shows that London's approval rate for new higher-risk buildings and conversions had improved to 97%, with a median approval time of 22 weeks.
The problem has therefore changed. Gateway 2 is no longer defined by the very low approval rates seen in 2025, but 111 London new-build applications covering 22,204 homes were still in progress on 5 October. For a developer carrying land, design teams and finance before construction revenue begins, time remains part of the viability calculation. LCM tracks those decisions through its Gateway 2 Approval Index.
Canada Water shows what slow sales do to the next phase
British Land and AustralianSuper secured approval on 27 March 2026 for a revised Canada Water masterplan allowing up to 4,184 homes. The reset increased residential height and massing, introduced alternative living uses and set affordable housing at 20% in the next phase with a minimum 9% across the masterplan.
British Land's 2026 annual report gives a useful demand marker from the completed first phase. At 31 March 2026, 57 of the 186 apartments in The Founding had been sold, or 30.6%. The building had completed during the first quarter of 2026.
The next residential phase, previously expected from 2027, was paused in October as British Land and AustralianSuper held back further delivery while market conditions remained difficult. LCM's earlier report on Canada Water and Lewisham records the two October pauses and the different routes that brought each project to a stop.
Lewisham shows the affordable-housing problem from the other side
Lewisham Shopping Centre had already reached a planning resolution before Landsec put the redevelopment on hold. Council records for application DC/24/137871 describe up to 1,744 conventional homes, 630 student beds and 445 co-living units. Affordable housing amounted to 20% of the conventional homes, and planning officers recorded that this was the maximum viable level identified through the assessment.
Lewisham Council then agreed in principle on 21 January 2026 to use compulsory purchase powers to support land assembly, subject to conditions including a reasonable prospect of delivery and a robust Landsec business plan. By October, the position had changed.
On 20 October 2026, Lewisham Council confirmed that Landsec was deprioritising the redevelopment and placing the proposals on hold. Landsec cited market and economic conditions, while the council's administration said the amount of social rent needed to increase. More affordable housing improves access for residents, but it also changes the revenue side of the development appraisal unless grant, lower land value or another source of subsidy fills the gap.
The emergency measures are aimed at viability
The government and City Hall's March 2026 response recognises that permission alone is not producing starts. The Support for Housebuilding London Plan Guidance created a temporary route allowing eligible private-land schemes to proceed at a 20% affordable-housing threshold without a full viability assessment.
Separate CIL measures allow 50% Borough CIL relief on eligible residential floorspace where at least 20% affordable housing is provided and at least 60% of that affordable provision is social rent. The route runs to 31 March 2028, while qualifying schemes must start before 31 March 2030 for the temporary CIL relief.
City Hall also opened a £324m Developer Investment Fund in March 2026 for schemes capable of reaching practical completion by summer 2029. Its expression-of-interest window closed on 13 October 2026. Those measures reduce parts of the viability burden, but Canada Water and Lewisham were still paused later in October.
For London housing delivery, the harder test is now physical starts. Planning London Datahub recorded 21,665 in 2024/25, while about 48,000 permitted homes sat on sites that had not started. The emergency planning route remains open until 31 March 2028.
How LCM calculated this
LCM compared Planning London Datahub residential starts of 48,962 in 2022/23 with 21,665 in 2024/25, a fall of 55.8%. Dividing the GLA's approximately 48,000 permitted homes on sites not started at 2024/25 by the 2024/25 start rate gives 2.2 years of starts. Both calculations were made from GLA figures checked on 31 October 2026.
For the buyer calculation, LCM used official UK HPI London first-time-buyer prices of £460,990 in August 2023 and £473,000 in August 2026, together with Bank of England quoted 95% LTV two-year fixed mortgage rates of 6.93% and 5.52% respectively. Monthly repayments assume a 5% deposit and a 30-year capital-and-interest mortgage; they exclude taxes, legal costs, service charges, insurance and other ownership costs.
Expert Verification & Authorship
Founder & Author, London Construction Magazine | Construction Testing & Investigation Specialist