Sales strongest for build-complete homes, with developers optimistic about 2025 prospects
Demand for move-in-ready new homes in London is on the rise, while off-plan sales remain under pressure due to economic uncertainty. However, with further interest rate cuts expected in 2025, confidence in the market is strengthening, according to the latest findings from Knight Frank.
A survey of over 50 volume and SME house builders found that a third of London-based respondents expect reservation volumes in 2025 to surpass those of 2024, with nearly half predicting stable sales. Only a fifth anticipate a decline, indicating a more positive outlook for the capital’s new-build sector.
Shift towards Build-Complete homes
Buyers, both domestic and international, are increasingly prioritising ready-to-move-in homes over off-plan purchases. The volatile global economic and political climate has led to hesitancy among buyers, with many preferring to wait for greater certainty before committing to off-plan investments.
First-time buyers may also drive an increase in sales in the first quarter of 2025 ahead of anticipated stamp duty changes in April.
Overall, residential sales volumes in London increased by 4% in 2024 compared to 2023, buoyed by easing inflation and falling mortgage rates. However, the high-end market saw a downturn, with sales above £10 million dropping by 32%, driven by political uncertainty surrounding the non-dom tax regime and increased borrowing costs.
New Homes Market: Strongest activity at lower price points
The most active segment of the new homes market has been properties priced between £500,000 and £750,000. Knight Frank data reveals that exchanges within this price bracket rose by 20% in 2024 compared to the previous year, with offers accepted increasing by over 25%. Despite this, demand remains strong across higher price ranges, particularly for new developments priced between £1 million and £3 million.
While new home sales are increasing, competition appears to be easing, with declines in viewings, offers, and new applicants recorded. This suggests that while buyers are committed to purchasing, they are being more selective in their choices.
Developers adapting to market conditions
With mortgage rates expected to fall further, a third of developers identified reduced borrowing costs as a key factor supporting sales in 2025. Additionally, developers are offering incentives such as white goods, legal fee contributions, and price discounts to attract buyers.
Meanwhile, developers are increasingly focusing on repurposing existing retail spaces for mixed-use developments. Notable projects include the planned transformation of Edgware’s Broadwalk Shopping Centre into a residential and commercial hub featuring 3,365 homes and 460,000 sq ft of retail and leisure space.
Looming supply crunch
Despite growing demand, the London market is bracing for a supply shortage. Construction activity has significantly declined, with private housing starts in 2024 reaching their lowest level in 14 years, down nearly 70% from their 2015 peak. Build-to-rent (BTR) starts have also fallen to their lowest annual level since 2014.
Only 6% of private development sites currently under construction in London are scheduled to extend beyond 2027, with none expected to continue past 2028. This supply constraint is expected to support price growth, with Knight Frank forecasting a 2% increase in both 2025 and 2026, and cumulative growth of over 15% over the next five years.
As the London new homes market gains momentum, buyers are prioritising completed stock, and developers are adjusting to evolving buyer preferences. With easing mortgage rates and a tightening supply pipeline, those who adapt now will be best placed to capitalise on emerging opportunities in the market.