London's luxury property market is grinding to a halt, with 1,400 completed but unsold homes piling up in the capital's most expensive postcodes by the end of September. That figure is three times higher than the 2016 level, according to figures from market researcher Molior. The problem is acute in zone 1, which includes central areas such as Mayfair, Marylebone and the City financial district. Just 1,600 homes started construction in the past 12 months across this area, 75% fewer than a decade ago, Molior found.
Developers are being caught in a squeeze between soaring construction costs and weakening buyer demand. Borrowing has become far more expensive, leaving developers sitting on growing debt piles before selling a single flat. For wealthy overseas purchasers, a key deterrent is stamp duty of up to 19% on additional properties, alongside tax changes around the abolished non-dom regime. A £10m home purchase could trigger a £1.9m stamp duty bill. Uncertainty over these taxes and holding costs has pushed many discretionary buyers to the sidelines, particularly in the prime market where there are fewer needs-based purchasers.
The strain is showing across the sector. London Richmond, a specialist developer in wealthy neighbourhoods including South Kensington and Wimbledon, appointed administrators in August after owners ran out of funding, leaving more than 300 creditors waiting for £39m in outstanding debt. Ardmore Construction, which was building major projects including residential towers in King's Cross and luxury developments in Mayfair and Kensington, fell into administration in 2025, with the construction arm owing over £29m to creditors and subcontractors as of September. Even major housebuilders are retreating: Taylor Wimpey said it plans to pull out of London entirely, while Berkeley Group announced it would stop buying new land.
The slowdown is hitting the rental market differently. Jerome Lartaud, a buying agent for ultra-high net worth individuals typically holding at least £22.4m in investable assets, said many clients are choosing to rent rather than buy. Over the past 12 months, 338 homes with annual rent exceeding £150,000 have been leased, a 14% rise and a new record. However, property consultants warn that a buoyant rental market offers no lifeline for developers when house prices stagnate. Construction vacancies fell by 7,000 in the July to September quarter, the hardest hit sector across the UK's workforce according to Office for National Statistics estimates.
The weakness is particularly evident in flat prices. The average London flat cost about £431,000 in June, down £2,000 from June 2016, according to Land Registry figures published in August. If flat prices had kept pace with inflation over that decade, the average would be £180,000 higher. By contrast, house prices have risen about a fifth over the same period. Even on the country's most expensive streets, demand has evaporated. No 1 Palace Street, a luxury development near Buckingham Palace, entered administration in 2023, with only 20% of flats sold by 2025.
For buyers and borrowers, the impasse reflects how higher interest rates and tax changes are making wealthy purchasers reconsider their investment timing, while construction jobs disappear and new housing supply dries up despite acknowledged long-term housing shortages.