ondon has no shortage of luxury flats. There are ultra-modern blocks in the most upmarket neighbourhoods – including Chelsea, Kensington and Mayfair – that offer marble lobbies, concierge services and views across the city's skyline.
The problem for property developers is finding wealthy residents to fill them, leaving brand-new properties in London's most desirable postcodes standing empty.
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, according to figures from the market researcher Molior. Just 1,600 homes started construction in the area in the past 12 months, 75% fewer than a decade ago, it found.
As a result, building these high-end homes is becoming increasingly hard to justify commercially for developers. Construction costs are rising and volatile, borrowing is now more expensive and financing a project can mean sitting on a fast-growing debt pile before a single flat is sold.
The multimillion-pound homes developers are building remain way out of reach for the average Londoner, while a range of factors have put a squeeze on some wealthy buyers. A rise in borrowing costs has become the latest headache in the high-end property market, which was hit hard by Brexit, the Covid pandemic and higher property taxes after a period of rapid price growth post-financial crisis.
The sector is starting to crack. London Richmond, which marketed itself as a specialist developer in the capital's "finer areas", had boasted a portfolio of 20 properties worth more than £30m, spanning affluent neighbourhoods including South Kensington, Wimbledon and West Hampstead. It appointed administrators in August, after its owners ran out of funding. More than 300 creditors are still waiting for payment of £39m in remaining debt, according to its administrator BTG.
The developer Ardmore Construction – which was building 10 major projects across the capital including two residential towers in King's Cross and luxury hotel developments in Mayfair and Kensington – also fell into administration, in 2025.
While its parent company Ardmore Group continues to trade – after its creditors accepted a company voluntary arrangement – the construction arm of the business still owed more than £29m to its creditors and subcontractors as of September.
Jon Neale of the property consultancy Montagu Evans said high-end developers were being squeezed by a double whammy of rising costs and weaker demand.
"The fundamental problem is that construction costs have gone through the roof," he said. "On the other side, demand for these properties has gone down … 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, pointing to tax changes around stamp duty and the abolition of the non-dom regime.
Overseas buyers can face stamp duty of up to 19% on additional properties – which means, for example, the purchase of a £10m home could trigger a £1.9m stamp duty bill.
Marcus Dixon of the real estate company JLL said developers needed more certainty that there will be a market for their homes once they finish building them.
"Uncertainty over taxation, buying and holding costs has deterred more discretionary purchasers from committing to buy," he said. "This hits the prime markets, both new and existing homes, harder, as we see fewer needs-based buyers in this sector of the market."
The slowdown has hit bigger developers, too; in October, British Land announced it would not go ahead with the second phase of its Canada Water development on the south side of the River Thames, amid soaring costs and weak sales. The city's biggest residential developer, Berkeley Group, said this year that it would stop buying new land, and the rival builder Taylor Wimpey has said it plans to pull out of the city entirely.
The difficulties are particularly pronounced in the market for flats. 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. House prices, by contrast, have risen by about a fifth over the same period.
Even on the most expensive roads in the country, the market is slow. No 1 Palace Street, a luxury residential development a stone's throw away from Buckingham Palace, entered administration in 2023. By 2025, only 20% of the project's flats had sold, according to its administrator FRP Advisory.
The shaky market is starting to hit jobs. Construction vacancies fell by 7,000 in the July to September quarter, according to estimates from the Office for National Statistics, making the sector the hardest hit across the UK's workforce.
Jerome Lartaud, a buying agent for ultra high net worth people – typically defined as those with at least $30m (£22.4m) in investable assets – said many were now choosing to rent rather than buy.
"Quite a few have decided to put their buying on hold and stay put in a rental in London," he said. "Both domestic and international buyers. If you are relying on a mortgage … it is really difficult, and rates can change even after the point of exchange. It is a lot of pressure for people with mortgages."
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.
For developers, however, a buoyant rental market does not represent a lifeline. "When rents are up, but the 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."
BTG declined to comment on London Richmond and Ardmore's administration. Administrators at FRP for No 1 Palace Street declined to comment.