London's most desirable postcodes are filling with brand-new luxury flats that cannot find buyers. 1,400 completed homes stood unsold in the capital's zone 1 at the end of September, three times the number recorded in 2016, according to market researcher Molior. The number of homes started in the area in the past 12 months was 75% lower than a decade ago. Developers contend with rising costs and weaker demand, while Marcus Dixon of JLL said uncertainty over taxation, buying and holding costs had deterred more discretionary purchasers.
The slowdown has pushed several developers into administration. London Richmond, a specialist in prime central areas, appointed administrators in August after its owners ran out of funding, leaving more than 300 creditors owed £39 million. Ardmore Construction, which was building 10 major projects including residential towers in King's Cross and luxury hotels in Mayfair and Kensington, also fell into administration in 2025, still owing £29 million. Its parent company continues to trade after creditors accepted a company voluntary arrangement.
The high-end property market has been hit by a combination of Brexit, the Covid-19 pandemic and higher property taxes, including stamp duty changes for overseas buyers and the abolition of the non-dom regime. Jon Neale of property consultancy Montagu Evans said developers face a double whammy: “Construction costs have gone through the roof. On the other side, demand for these properties has gone down … Overseas buyers are not in the market as much as they were.” Marcus Dixon of JLL pointed to uncertainty over taxation: “Uncertainty over taxation, buying and holding costs has deterred more discretionary purchasers from committing to buy. This hits the prime markets, both new and existing homes, harder.”
The difficulties are also affecting bigger developers. British Land announced in October it would not go ahead with the second phase of its Canada Water development amid soaring costs and weak sales. The city's biggest residential developer, Berkeley Group, said this year it would stop buying new land, and Taylor Wimpey has said it plans to pull out of London entirely. Flat prices have barely moved; the average flat in London cost about £431,000 in June, down £2,000 from the same month in 2016, and would be £180,000 higher if they had kept pace with inflation. Even on the most expensive roads in the country, sales are slow. No 1 Palace Street, a luxury development near Buckingham Palace, entered administration in 2023; by 2025 only 20% of its flats had sold, according to its administrator.
Jerome Lartaud, a buying agent for people typically defined as having at least $30 million in investable assets, said many were putting purchases on hold and staying in rental properties. JLL found that 338 homes with annual rent of more than £150,000 were leased over the past 12 months, a 14% rise on the previous year and a new record. But a buoyant rental market does little to help developers. “When rents are up, but house prices are sticky and land prices are still, it takes time for them to adjust,” Neale said. “Everyone is confident about London in the long term because we have this huge shortage of housing. But there is a lot of unsold stock building up.”
Analysis
Why This Matters
- The slowdown in luxury construction could worsen London's housing shortage, as fewer new homes come to market despite strong rental demand.
- Construction vacancies fell by 7,000 in July to September, the biggest drop of any UK sector, signalling job losses ahead.
- Stagnant flat prices, while house prices rise, point to a deepening affordability divide in the capital.
Background
London's high-end property market boomed after the 2008 financial crisis, drawing international buyers seeking a safe asset. But a series of policy changes, including higher stamp duty on additional properties, the impending abolition of the non-dom tax status, and rising interest rates, has cooled demand since the Brexit vote. Construction costs have soared, squeezing margins on new developments.
Key Perspectives
- Jon Neale (Montagu Evans): Says developers face a "double whammy" of soaring construction costs and weaker demand, with overseas buyers less active.
- Marcus Dixon (JLL): Points to uncertainty over taxation and holding costs as a key factor deterring discretionary buyers, hurting the prime market.
- Jerome Lartaud (buying agent): Reports that many ultra-wealthy clients are now choosing to rent rather than buy due to mortgage rate volatility.
What to Watch
- Whether more developers follow London Richmond and Ardmore into administration as financial pressures mount.
- The impact of the abolition of the non-dom tax regime on overseas buyer interest.
- Any government measures to stimulate housing supply or address the growing stock of unsold luxury homes.
Checked
12 claims in this story checked against 1 source: 8 supported.
Show each claim
- SupportedLondon’s luxury flats are piling up as the high-end property market slows.UK news | The Guardian: “Prime property, slow sales: why London’s stock of empty high-end flats is piling up.”
- SupportedThere were 1,400 completed but unsold homes in zone 1 at the end of September, three times the 2016 number.UK news | The Guardian: “In the capital’s zone 1 – which includes the City financial district, the West End and central areas such as Mayfair and Marylebone – there were 1,400 completed but unsold homes at the end of September, three times the number recorded in 2016”
- SupportedHomes started in zone 1 in the past 12 months were 75% fewer than a decade ago.UK news | The Guardian: “Just 1,600 homes started construction in the area in the past 12 months, 75% fewer than a decade ago, it found.”
- SupportedBrand-new flats in London’s most desirable postcodes are standing empty because they cannot find buyers.UK news | The Guardian: “The problem for property developers is finding wealthy residents to fill them, leaving brand-new properties in London’s most desirable postcodes standing empty.”
- Partly supportedNeale said: “Overseas buyers are not in the market as much as they were.”UK news | The Guardian: ““A lot of those homes are being sold to overseas buyers and they are not in the market as much as they were,” he added”
- Partly supportedNeale said: “When rents are up, but house prices are sticky and land prices are still, it takes time for them to adjust.”UK news | The Guardian: ““When rents are up, but the house prices are sticky and land prices are still, it takes time for them to adjust,” Neale said.”
- Not in the sourcesThe market slowdown pushed several developers into administration.UK news | The Guardian: “It appointed administrators in August, after its owners ran out of funding.”
- Partly supportedArdmore Construction still owed £29 million when it entered administration.UK news | The Guardian: “the construction arm of the business still owed more than £29m to its creditors and subcontractors as of September.”
- SupportedThe average London flat cost about £431,000 in June, £2,000 less than in June 2016, and would be £180,000 higher if prices had kept pace with inflation.UK news | The Guardian: “The average flat price was about £431,000 in June, down £2,000 from the same month in 2016, according to Land Registry figures published in August. If flat prices had kept pace with inflation, the average would be £180,000 higher now.”
- SupportedBy 2025, only 20% of No 1 Palace Street’s flats had sold.UK news | The Guardian: “By 2025, only 20% of the project’s flats had sold, according to its administrator FRP Advisory.”
- SupportedLartaud is a buying agent for people typically defined as having at least $30 million in investable assets.UK news | The Guardian: “Jerome Lartaud, a buying agent for ultra high net worth people – typically defined as those with at least $30m (£22.4m) in investable assets”
- SupportedJLL found that 338 homes renting for more than £150,000 a year were leased over the past 12 months, a 14% rise and a record.UK news | The Guardian: “JLL found that 338 homes with annual rent of more than £150,000 have been leased over the past 12 months, a 14% rise on the previous year and a new record.”