Headline indices and sentiment surveys tend to tell you where the market has been. To understand where it's actually heading, you need to look at transactions and where capital is being deployed. That's the lens this piece takes.
The underlying story is a simple one: demand for London hasn't gone away. The city's pull as a global centre for talent, capital and employment remains intact. The complexity lies in how that demand is being expressed — and increasingly, that's not through traditional ownership. If you want to stay up to date with how the shaping up, David Harris & Co is here for you.
Ownership Demand Hasn't Disappeared — It's Being Priced Out
The aspiration to own a home in London is still very much alive. What's changed is people's ability to act on it. Last year, 48,820 mortgage loans were granted to first-time buyers in the capital — the highest annual total since the Global Financial Crisis, if you set aside the brief spike during the stamp duty holiday. The driver was straightforward: mortgage rates eased through 2025, and affordability improved as a result.
That relationship cuts both ways. Rates fell for most of 2025 before climbing again in early 2026, and buyer activity responded almost immediately in both directions. Industry figures point to just how fine the margins are here — even a modest 15 basis point rise in mortgage rates can be enough to tip a buyer past an affordability threshold. The consensus among agents is that this isn't a fading desire to own; it's renting by necessity rather than choice, and as soon as the pressure eases even slightly, first-time buyer activity picks back up.
That reframes the current softness in the for-sale market. It looks less like structural decline and more like demand that's been pushed back, waiting for borrowing costs to settle and for institutional rental stock to be priced more accessibly. The tension for the market is that rising house prices help viability and delivery, but simultaneously make the affordability problem worse — both need managing at once.
The Rental Market Is Normalising, Not Collapsing
After the exceptional rental growth of 2022 and 2023, London's rental market has settled into a calmer phase. This is best understood as a return to more typical conditions rather than a market in trouble.
Affordability remains the central issue. HomeLet data puts the gross rent-to-income ratio for new London tenancies at 38.3% — still high by historical standards. But that headline figure hides a growing split: conditions are easing for higher earners while pressure continues to build for those on lower incomes. Renting isn't purely a financial decision either — for higher earners who move frequently for work, it's often a deliberate choice for flexibility.
The strain is visible in how tenants are behaving: more people relocating to cheaper areas, more sharing of properties, and more downsizing.
At the same time, structural pressure on landlords is mounting. The Renters' Rights Act, introduced in May, along with tightening energy efficiency requirements running through to 2030, is adding to costs and compliance obligations. Private landlords are leaving the market in meaningful numbers, and institutional build-to-rent delivery isn't yet scaling fast enough to replace that stock. The net effect is a market where falling demand and shrinking supply are broadly cancelling each other out, keeping things tighter than the headline demand figures alone would suggest.
The scale of landlord exit is significant. UK Finance figures show outstanding buy-to-let mortgages have fallen by roughly 643,000 since 2016. The NRLA's most recent landlord survey found that 40% of members are weighing up a sale within the next two years, and Zoopla estimates that 31% of London homes listed for sale at the end of 2025 had previously been rented out.
Institutional supply isn't yet closing that gap. London's multifamily sector added 31,004 units between 2020 and 2025, with 4,355 of those delivered in 2025 alone. CBRE's forecast puts future delivery at around 4,000 units a year through to 2030 — below the 5,100 average seen over the previous five years. Alternative products remain small in scale too: the UK had roughly 11,000 operational co-living beds in 2025, mostly concentrated in London, while purpose-built student accommodation continues to face its own supply-demand imbalance.
What's actually needed to close the rental affordability gap comes down to a fairly short list: affordable housing from registered providers, single-family build-to-rent in outer London, and amenity-light, mid-market multifamily stock.
London's Employment Base Remains the Foundation
International demand for London Living property looks quite different than it did a decade ago. Buyer interest is no longer concentrated in just two or three geographies but is spread more broadly, which gives the market a useful cushion — when one region slows, others tend to pick up the slack, particularly valuable during periods of wider economic or geopolitical uncertainty.
Underpinning all of this is London's role as the country's primary employment hub. Office-based employment in the capital grew by 28.6% cumulatively between 2016 and 2025, outpacing many European and global peer cities, with a further 8.1% cumulative growth forecast through to 2030. Population growth, rising incomes and a resilient labour market continue to drive housing need across every tenure and price point.
Bulk Sales Are Where Institutional Demand Shows Up First
One of the clearest signs of institutional capital absorbing surplus stock is in bulk sales — where developers sell off completed but unsold homes in single transactions rather than through the usual drip-fed sales process.
Molior data shows 3,648 complete and unsold new-build homes across London in Q1 2026, equivalent to 39% of the annual sales rate — the second-highest proportion on record. Buyers of this stock are a mixed group: local authorities looking to cut temporary accommodation costs, registered providers, for-profit registered providers, and opportunistic institutional investors.
The shift towards bulk purchasing is measurable. Of new homes sold over the 12 months to Q1 2026, 58% went to companies via build-to-rent, block sales, other bulk deals or affordable-tenure switches, up from 52% in 2024. Within that, bulk deals excluding build-to-rent rose to 7% of sales, up from 4%, and homes switching to affordable tenure climbed to 15%, up from 11%. Traditional open-market sales to individual buyers fell over the same period, from 34% to 30%.
The turnkey sale of Barratt London and LRC's Eastman Village scheme in Harrow is a useful real-world example — completed build-to-rent stock transferring in one transaction to long-term institutional ownership, freeing the developer to reinvest in new delivery. Industry sentiment suggests this kind of activity is accelerating rather than slowing, with completed stock increasingly being absorbed by local authorities, registered providers and opportunistic buyers taking advantage of where the cycle currently sits.
What This Means Going Forward
The desire to live in London hasn't weakened — but affordability and market dynamics continue to reshape how that demand is met. For-sale supply remains constrained, the rental market is settling from unusually high levels, and affordability continues to shape behaviour across the board.
There is progress on the supply side, but it won't be enough on its own. With borrowing costs still elevated and consumer confidence subdued, some form of demand-side support looks necessary to bring schemes forward at scale. There's also a widening gap between housing policy targets and what the market can realistically deliver, which risks deepening the supply shortfall over time if left unaddressed.
Build costs remain a persistent constraint too — viability, more than anything else, is what limits the pace of delivery in London. Ultimately, demand, capital and delivery are closely linked, and converting underlying desire into deliverable homes will depend on structures like bulk sales, joint ventures, for-profit registered provider models and mid-market rental playing a central role.
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