London's Future: A Reset for Living

A recurring theme across the market is that the aspiration to own a home in London has not disappeared. For many, it has become an unaffordable goal. Evidence from 2025 supports this. Last year 48,820 mortgage loans were granted to first-time buyers in London. This was the highest number in a single year since the Global Financial Crisis (GFC), excluding the recent stamp duty holiday. The key driver was improved affordability, as mortgage rates eased.

Figure 1: Mortgages granted to London first-time buyers since 2007

CBRE’s Q1 2026 forecasts illustrate how sensitive demand remains to borrowing costs. Mortgage rates fell through 2025 before increasing again in early 2026. The demand response has been immediate in both directions. Even small movements in rates materially affect affordability thresholds, with marginal increases sufficient to deter home buyers, particularly in high-value regions like London.

Jason Hardman, Head of UK Living adds: "The ownership demand has always been there. It’s just been frustrated by affordability."

This distinction is critical. It reframes current weakness in the for-sale market not as structural decline, but as suppressed demand that can re-emerge as conditions improve. Borrowing costs normalising and institutional rental housing priced for the mid-market will be crucial for this.

However, rising house prices, while positive for viability and delivery, will also reinforce affordability constraints. The challenge for the market is not to resolve one tension by exacerbating another, but to manage both simultaneously.

London’s rental market has entered a new phase. Following a period of exceptional growth in 2022 and 2023, conditions have normalised. This cooling reflects a return from unusually strong levels rather than a decline into weakness.

Figure 2: Annual rental growth in London since 2022

However, headline affordability metrics mask an increasingly polarised reality. Improved conditions for higher earners sit alongside intensifying pressure for lower-income households, reflecting a widening divergence across income bands. Aside from affordability, it is also worth noting that the decision to rent can be one of flexibility, joining up with higher earners who may relocate frequently due to the nature of their employment.

The consequence of affordability pressures is visible in tenant behaviour, with tenants relocating to more affordable areas, higher levels of sharing, and downsizing.

At the same time, structural changes to the private rented sector are accelerating landlord exit. Regulatory reform, including the Renters’ Rights Act introduced in May, alongside tightening energy efficiency requirements to 2030, is increasing cost and compliance pressures.

While private landlords are increasingly leaving the rental market, institutional build-to-rent delivery remains insufficient to replace that stock at scale. The result is a market where reduced demand is largely offset by reduced supply, maintaining underlying tightness.

Ibrahim expands: "You’ve got slightly lower demand, but you’ve also got private landlords leaving in considerable numbers and BTR supply slowing. That reduction in supply will mask the drop in demand. The pendulum will keep swinging."

The scale of the private landlord exit matters. UK Finance reports that outstanding buy-to-let mortgages have declined by approximately 643,000 since 2016. The NRLA’s latest landlord survey suggests that 40% of members are considering selling within the next two years, while Zoopla estimates that 31% of London homes listed for sale at the end of 2025 were previously rented.

Institutional rental supply is not yet filling the gap. London multifamily added 31,004 units between 2020 and 2025 – 4,355 in 2025 alone CBRE expects delivery to average around 4,000 a year through to 2030, well below the 5,100 averages of the preceding five years.

Alternative rental products are also limited in scale. The UK had approximately 11,000 operational co-living beds in 2025, predominantly in London, while the PBSA sector continues to face a pronounced supply-demand imbalance.

Figure 3: London multifamily and co-living delivery by year, 2021 - 2025

The housing product needed to plug the rental affordability gap at scale is a short list:

• Affordable housing from registered providers
• Single-family BTR in the outer donut
• Amenity-light mid-market multifamily

The composition of international demand for London Living property has evolved significantly over the past decade. Buyer pools are no longer concentrated in two or three corridors but are instead more diversified and nuanced.

That diversification is what gives London resilience. When buyer activity slows from one geography, others tend to compensate.

For a global city, this breadth of demand is a critical stabilising factor, particularly in periods of geopolitical or economic uncertainty.

Demand for London Living is sustained by the capital’s reputation as the country’s primary employment hub. In fact, at 28.6%, cumulative growth in London’s office-based employment (2016-2025) has exceeded that of many of its European and global peer cities, and we expect a further 8.1% cumulative growth in the forecast to 2030*.

Population growth, income expansion, and labour market strength underpin housing need across all tenures and price points. In this context, the Living market is not just reacting to rates and supply. It is responding to a deep and sustained employment base that continues to expand.

One of the clearest places to see institutional demand absorbing the for-sale market’s overhang is bulk sales, transactions in which developers dispose of completed but unsold stock in single deals rather than drip-feeding units through traditional sales programmes.

Molior data put the number of complete and unsold new-build homes in London at 3,648 in Q1 2026, representing 39% of the annual sales rate, the second-highest proportion ever recorded.

Figure 4: New-build home sales, and complete and unsold new-build homes, 2009 - Q1 2026

Buyers are varied, including local authorities reducing temporary accommodation spend, registered providers, for-profit RPs, and opportunistic Living investors.

Molior’s latest breakdown shows that 58% of new homes sold over the 12 months to Q1 2026 were acquired by companies, through BTR, block sales, other bulk deals or affordable-tenure switches, up from 52% in 2024. Within this bulk deals (excluding BTR) represented 7% of sales (up from 4%), indicating a continued shift towards bulk purchasing. Meanwhile, homes switched to affordable tenure made up 15% of sales, a rise from 11% in 2024, reinforcing the growing role of alternative delivery routes, while traditional UK market sales fell from 34% to 30% over the same period (2024 vs 2025/6).

Figure 5: New home sales by buyer type, 2024 - Q1 2026

The Barratt London and LRC turnkey sale at Eastman Village in Harrow, illustrates this with current evidence: completed BTR stock moving in a single transaction to long-term institutional ownership, the developer freed to recycle capital into new delivery. It is exactly the route that converts demand into delivery at the speed the market now needs. Hardman sees the activity intensifying, not tailing off:

The desire to live in London remains intact, but it is increasingly constrained by affordability and market dynamics. Demand has been reshaped and redistributed, while supply in the for-sale market remains constrained, the rental market adjusts from recent highs and affordability continues to influence behaviour.

Progress is being made on the supply side, but this alone will not unlock delivery. In the current macro environment, with higher borrowing costs and weaker consumer confidence, some form of demand-side stimulus is still needed to enable schemes to come forward at scale.

A widening gap between policy ambition and deliverable supply is also becoming clear. Ambitious housing targets are not aligned with current market realities and risk translating into a deeper supply shortfall over time.

At the same time, build costs continue to limit delivery. Viability remains the key constraint, with the cost of building in London restricting the pace at which new homes can be brought forward.

Ultimately demand, capital and delivery are interdependent. The focus now needs to be on ensuring the right structures are in place so consumer desire can be converted to demand. Bulk sales, joint ventures, for-profit registered provider models and mid-market rental will all play a central role in delivering housing at the scale London requires.