The number of private homes under construction in London is set to slump to as few as 15,000 - about a quarter of “normal” levels - by the end of next year as the capital’s housebuilding crisis deteriorates.
London development analysts Molior said that typically around 60,000 to 65,000 homes are being built in the capital at any one time.
However, this has dropped to 40,000 currently, and with few new schemes coming through and more reaching completion, this will collapse to just 15,000- 20,000 new homes actively under construction across London by 1st January 2027.
The dire new warning about the decline in housebuilding comes amid reports that Mayor Sadiq Khan is considering a relaxation of the requirement that private housing schemes must include 35% of homes designated affordable.
Developers say this requirement prevents many schemes from going ahead because they are not commercially viable at a time when costs construction costs have soared but prices have flatlined.
It has been reported the Mayor is considering a temporary relaxation to just 20% affordable or even lower but negotiations with the Government are said to be ongoing.
Tim Craine, founder and director at Molior London, said: “Without progress on two key fronts , Molior forecasts that only 15,000 to 20,000 private homes will be under construction in London on 1 January 2027. That’s just 10% of the 150,000 to 200,000 run rate for the government to deliver 88,000 completions each year on an ongoing basis.
“Rachel Reeves and Steve Reed know they must tackle the self inflicted barriers to housing delivery created by George Osborne and Sadiq Khan.”
He called for a reduction in the extra stamp duty paid by investors, and an end to “excessive development costs, driven by unrealistic London-specific requirements for affordable housing, Community Infrastructure Levy (CIL) and building design.”
Molior’s third quarter report showed new home sales dropping to just 5,933 new home sales in the first nine months of the year. Completions in 2027/28 are expected to be only 6% of the Government’s target.
It added: “Sales rates are weak across all local markets and at every price point. At prices up to £600 psf - the level at which most London owner-occupiers can buy - sales to individuals are virtually non-existent.”
The report added that high development costs means “it is unviable to build profitably in half of London – areas under £650 psf. This is even if the land is provided free and there are no planning obligations like CIL and affordable housing. “
