This is an overview of recent planning policy developments and current or emerging consultations across the Central London boroughs. It also includes updates from the Mayor of London and the Government on the capital for Q4 2025 and Q1 2026.

PLANNING POLICY HEADLINES

• MHCLG’s Support for Housebuilding (Package of Support) was announced on 25 March 2026. This was after a period of consultation, including temporary CIL relief for qualifying residential schemes and permanent enhancements to Mayoral planning powers. The latter encompassed the introduction of expanded call-in powers for larger or sensitive developments and the allocation of £324 million to establish a City Hall Developer Investment Fund.
• The GLA adopted the Support for Housebuilding LPG, which introduces a streamlined package of emergency measures to accelerate housing delivery in the capital. These include amendments to cycle parking requirements, updates to housing design guidance, and a new time‑limited planning route to support affordable housing delivery. This will apply until 31 March 2028.
• The Oxford Street Development Corporation will become the local planning authority for the area. This is effective from 1 June 2026 and is subject to the parliamentary process.
• Westminster and Wandsworth adopted partial reviews of their Local Plans in January and March 2026. These cover updates to housing and affordable housing policies, with Westminster introducing its new Retrofit First policy.
• Southwark issued the final draft of the Old Kent Road Area Action Plan (AAP) to the Planning Inspector for Examination in Public in November 2025.
• In November 2025, Westminster, RBKC, and Hammersmith and Fulham were all affected by a cyber‑attack. This resulted in the shutdown of core operational functions across their departments. The planning services of all three authorities were affected, limiting their ability to validate applications, undertake consultations, or issue decisions between November 2025 and February 2026. As of 31 March 2026, all three LPAs are fully operational, but face expected backlogs and delays.

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London’s residential development market remains severely constrained. Housing starts in 2025 (7,480) are under half the long‑term average and far below London Plan requirements. And while developers have been blaming viability, planning delays and the Building Safety Act, this year’s Montagu Evans London and South East Residential Land Survey shows a decisive shift.

Our survey of 53 developers and investors in London and the South East shows that market demand has now become the primary brake on delivery.

Developers report weak buyer confidence, reduced overseas investment, and affordability pressures. As a result, they’re worried about whether they can sell new homes, not just their ability to build them. This is despite the recent resurgence of institutional capital, which has provided a much-needed lifeline.

Format preferences are also changing. Medium‑rise apartment blocks (up to ~6–8 storeys) are now the clear favourite among developers. This reflects buyer appetite and an attempt to avoid exposure to the safety regulations around high‑rise buildings. Low‑rise family housing has surged in popularity too, even among London specialists. However, land constraints limit its potential within the capital.

The land market is adjusting, with most respondents now seeing slight price declines, indicating a greater pragmatism among landowners. Meanwhile, the MHCLG/GLA emergency measures, aimed at boosting viability and still in draft form at the time, are cautiously welcomed. That said, many think the time limits – now extended – would have prevented them from being effective.

Overall sentiment suggests that the market had started to stabilise before the Iran conflict, with expectations of a gradual recovery. Developers were beginning to look ahead to delivering in supply-constrained markets in 2027 and 2028. However, political unpredictability and the decline of the off‑plan investor market have eroded confidence. Many developers call for renewed demand‑side stimulus (e.g., SDLT holidays or Help to Buy) to help absorb smaller flats.

The survey underlines that London’s housing crisis can no longer be attributed solely to planning, viability, or building safety. Demand‑side weakness, particularly for urban high‑rises, is now an equally important constraint. This will require planning authorities to take account of the market’s pivot towards medium‑rise and family housing.

The findings also strengthen the case for the government’s new towns programme. Many of the sites can deliver the mix of mid‑rise and suburban format favoured by developers and buyers.

Note: This briefing was finalised on 23 February, before recent events in Iran and the wider Middle East. Energy prices have spiked, and there are concerns that this could lead to higher inflation, slowing down the speed of future base rate cuts and, in turn, the speed of the gradual recovery outlined below. Much will depend on the length of the conflict and the resulting disruption to oil and gas supplies.

Overview

• The UK economy is showing signs of a gradual improvement. While growth is set to remain modest, inflation is easing, and interest rates are falling. This will provide a more supportive backdrop for markets as 2026 unfolds.
• Property markets – and the sentiment around them – appear to have reached an inflexion point. Investment volumes saw the strongest activity in four years in the fourth quarter, led by offices and industrial. This momentum looks set to be sustained, although it will be a gradual improvement, not a boom.
• Across offices, industrial and residential, low construction and robust demand will push up rents over the year, gradually easing viability challenges – although it will be some time before supply can recover more strongly.

A Gradually Improving Economic Backdrop

The final economic reading of the year, GDP growth in Q4, came in with a lacklustre 0.1%, but over 2025, the UK economy grew by 1.3%. This is clearly not spectacular, but it is not terrible either – which might come as a surprise given the economic doom and gloom in the press. Even GDP per capita rose by 1.0% over the year, up from a big fat zero in 2024.

This kind of story is repeated across lots of datasets in both property markets and the wider economy. Slowly, things are beginning to improve, albeit usually at an unimpressive rate. But the results should be more apparent as 2026 progresses.

Take inflation as measured by CPI. December’s outturn was a little disappointing – 3.4%, up from 3.2% in November and slightly ahead of market expectations. But January saw it fall to 3.0%. Since the Summer peak, the trend has been clearly downwards. This is evident in the labour market, which is becoming looser; redundancies are increasing, vacancies are decreasing, and private sector wage growth is slowing.

The Bank of England had adopted a slow and cautious approach to cuts, with forecasters expecting just another two 25bps cuts over 2026, bringing the base rate to 3.25% by year-end. But it’s entirely possible that if all these measures continue trending downwards, there is another 25bps by year-end.

The slightly better economy is, of course, related to falling inflation and interest rates as well as the surprising fact that business investment has been running at historic highs since the pandemic (presumably related to technology). Oxford Economics is forecasting a slightly gloomier GDP growth of just 0.9% in 2026, but this may well be overshot if the wider context continues improving.

10-year gilts, the ‘risk-free rate’ against which property returns are compared, are a slightly different story. The bond market is not only reacting somewhat slower to changes – reflecting the scale of government borrowing both domestically and internationally – it is more volatile. This reflects the UK’s fragility, not just its own poor finances but also the vulnerable position of Kier Starmer and Rachel Reeves. Their replacement with a less fiscally conservative pairing is clearly a risk. At the time of writing, there are also rumours – indications, even – of further ‘events’ in the Middle East, which would also upset the wider picture.

Source: Bank of England + National Statistics + Market Watch

Assuming that none of this derails things too much, then bond yields should follow their choppy path downwards, with the result that property yields gradually become more appealing. Indeed, there is some evidence that the combination of solid if uninspiring growth, reducing rates and strengthening fundamentals in some markets has already been enough to get the market moving again.

Market Conditions Reaching an Inflexion Point

The final quarter of the year saw £17.1bn transacted, the highest total for almost four years. As can be seen below, every sector except retail is now seeing a steady upward trend. The standout was undoubtedly offices, which, with £6bn changing hands, saw the highest total since 2021. This was driven by some large-scale deals in London, with some major international institutions (Hines, Royal London) re-entering the fray.

Source: MSCI

The strong fundamentals in London’s office market have been apparent for a while. Rental growth has been strong, with prime city rents now at circa £100psf, compared to say £75psf three years ago. High vacancy rates obscure the shortage of new, high-quality offices that occupiers increasingly crave. Prelets have increased as businesses have looked to the pipeline, rather than the increasingly obsolescent-looking existing stock.

Net absorption in the Central London market was at its highest on record, even though leasing fell back, suggesting that companies are simply becoming less minded to leave space given constrained availability. Meanwhile, space under construction and construction starts are lower than they were a year ago. But most importantly, investor sentiment has turned, and even if you are sceptical about the arguments around polarisation, the herding effect alone should see both values and volumes rise over 2026.

Source: CoStar

The situation is, if anything, even more stark in the major cities outside London. There have been practically zero starts in every ‘big six’ city except one, and vanishingly small amounts under construction. Manchester stands out as the exception, with 400,000 sq ft started over the past twelve months. It is true that this city had the highest take-up over 2025, but it is not so far ahead of the pack to justify such an incongruity. I do wonder if some of the recent hype over its economy is skewing investment. Now that’s not to say it is doing well – it very clearly is, as any time spent in the city will confirm – but there are some questions over whether the very high figures for productivity growth (see here) are accurate.

Diverging Sector Performance

Industrial, on the other hand, is still seeing very strong investment, albeit not the great jump upwards seen by offices. The total for 2025, at £11.1bn, was the highest of any sector (just), and represented a 24% increase on 2024. I’ve had mild concerns about industrial for a while; leasing has been muted for two years or so, while vacancy has been rising, and rental growth has slowed considerably.

But over the last few months, a corner has been turned. The pattern is similar to the London office market – falling vacancy and increasing net absorption amid lower leasing activity. This implies that companies are simply not moving because there is insufficient new, good-quality space. (The main difference, though, is that the standout region now is the North-West).

Source: MSCI

So, in offices, residential and industrial, in some locations at least, the market is effectively screaming ‘build’. But that is more easily said than done. Construction costs and development debt costs remain high. Moreover, yields have not yet really budged downwards, partly a result of what’s happening in the gilt market.

The increase in investor interest should push yields down over the next year, at least in the London office market and at least by 25bps. The resulting increase in exit price will begin to make construction more viable, but in the medium term, the situation looks set to be one of shortage and increasing prices, assuming demand remains robust. This will continue to push rents for good-quality stock upwards, further supporting viability. This will take time to fix, though, meaning the whole issue of refurbishment and ‘retrofix’ moves up the agenda again as demand returns.

Looking at the MSCI performance data, though, retail saw the strongest returns in 2025 – 8.4%, driven mainly by very strong income returns (5.9%). As outlined above, retail spending is buoyant, and the flatness in internet sales proportions has confirmed that bricks-and-mortar shops have a future. The sector is now seeing rental and capital value growth, too – although all from the low base produced by the long years in the wilderness.

Source: MSCI

Of course, retail warehousing, supermarkets and out-of-town shopping centres have been doing well for a while, but the difference now is that they are joined by standard regional retail (8.4%) and Central London retail (8.9%). The weakness in investment may be more to do with a lack of supply, with investors perhaps choosing to hold onto such strongly income-producing stock.

Offices, on the other hand, remain highly polarised with West End offices’ total returns at 7.7%, and South East office parks at -5.5%. The urbanisation of office demand, particularly in the South, continues.

Source: MSCI

Residential Steadily Strengthening

Despite weak returns, residential is still seeing high volumes, though a number of large senior living transactions in Q4 skew the figures slightly; activity in the BTR sector slowed slightly towards the end of the year. However, there has been a resurgence in interest from investors, with a flurry of deals in London. At the end of 2025, M&G announced a joint venture with NPS, the Korean pension fund, to invest up to £1bn in UK multifamily, and other funds are gearing up for action. Meanwhile, Notting Hill Genesis’s sale of its BTR arm is also attracting huge interest.

This reflects gradually improving conditions in the London residential sector (see our research here) alongside the huge long-term potential of the sector, given low construction, rising population and persistent housing undersupply.

Conditions in the residential market are no exception to the slow improvement rule. Mortgage rates for higher LTVs have come down by almost a percentage point over the past year, and look set to fall further; greater competition for borrowers will force down margins even as rates fall. The rental market will become increasingly constrained over the year as the supply of properties falls back, a result of the combination of recent low BTR activity and smaller-scale landlords continuing to exit the market.

At the moment, though, the North and Midlands look more buoyant in terms of pricing and activity across both sides of the market, a result, really, of housing taking up a smaller proportion of people’s pay. But the above factors will lead to a recovery in London, where affordability has been most challenged.

So, in summary, wherever we look, the market seems to have reached an inflexion point. Unless something dramatic happens, things should get better in most sectors from now on. Just don’t expect a boom, though.

 

If you have any questions about this briefing note or any other aspect of the commercial or residential market, please contact jon.neale@montagu-evans.co.uk. We also carry out bespoke research for clients to inform strategy, guide policy or aid in individual sites or developments.

*This research has been prepared for general information purposes only. It does not constitute any investment, financial or other specialised advice or recommendations, and you should not, therefore, rely on its contents for such purposes. You should seek separate professional advice if required.

Executive summary

• After years of record-low starts and collapsing activity, early signs indicate that the end of 2025 marked a genuine turning point in London’s housing market, with investor interest increasing and construction gaining pace.
• Given delivery lags, completions in both BTS and multifamily BTR are set to fall sharply in 2027–28, tightening availability and pushing up rents, sales values and demand for sites.
• With viability improving and this supply squeeze on the horizon, 2026 represents a rare window of opportunity for land acquisition and alternative-use housing strategies for institutional capital.

CONTINUE TO THE PDF

As we close out 2025, the UK economy presents a complex picture: GDP growth has slowed, inflation is easing, and markets are adjusting to fiscal signals from the Autumn Budget. Beneath the headlines, there are signs of resilience, particularly in Central London leasing and selective investor appetite in industrial and residential sectors.

Our latest report provides a comprehensive review, including:

• Autumn Budget Analysis – Policy changes and their implications for growth and viability
• Markets Overview – Office and industrial leasing patterns, residential delivery challenges, and regional contrasts
• The Wider Economic Backdrop – GDP trends, inflation forecasts, and gilt yield movements

Click the link to read the complete PDF update. If you have any questions about this briefing note, please contact jon.neale@montagu-evans.co.uk. We also carry out bespoke research for clients to inform strategy, guide policy or aid in individual sites or developments – learn more here.

ACCESS THE RESEARCH

Britain’s cities have undergone a remarkable reinvention over recent decades. Once characterised by derelict Victoriana or post-war concrete, many urban centres have been reshaped through large-scale transformative projects, this report’s definition of regeneration.

Heritage buildings have been repurposed; new quarters provided with high-quality public space, anchored by cultural institutions; and city living has become mainstream. These efforts have helped turn such locations into vibrant destinations that attract investment.

But this transformation is uneven and fragile. Gleaming new buildings sit cheek-by-jowl with obsolescent, empty buildings and deprived enclaves, while local authority budgets are under extreme pressure.

Cities and towns have ambitious plans to continue to address these problems. But since the pandemic, rising construction and debt costs, stalled projects, and slowing demand have undermined progress. The sense is growing that Britain’s urban fabric is beginning to fray.

Nevertheless, there is optimism – and not without reason. Some projects are making progress despite the headwinds; others are creating inventive frameworks and approaches to enable it in the future. This report explores the state of regeneration across the UK – and the future of it – by drawing on:

• Site visits to eight major regeneration projects – Elephant Park, Old Oak Common, Royal Albert Dock (London), Bradford, Dundee, Liverpool, Brabazon in Filton near Bristol, and Harlow.
• Interviews with practitioners and stakeholders directly engaged in delivering, financing, and planning regeneration.

Together, these sources provide a grounded picture: the old regeneration models no longer work, and a new approach needs to emerge.

This report provides insight into the complex problems surrounding urban regeneration across the UK. For investors, developers, and local authorities, this is not just analysis – it’s a roadmap for action. We highlight where opportunities lie and how you can position yourself to drive the next phase of regeneration.

Based on visits to the eight ongoing projects and interviews with those involved, we aim to unlock value from those complex challenges and opportunities and offer actionable insight. While the picture is sometimes a little bleak, there are also plenty of new ideas and reasons for optimism.

Historic Models No Longer Work

Past phases of regeneration were shaped by their time. The 1980s saw bold public sector intervention through Urban Development Corporations; the 1990s and 2000s leaned heavily on private investment during years of growth; the 2010s were defined by austerity, competitive bidding pots, and a patchwork of “levelling up” programmes focused on “left behind” towns.

These models are now exhausted. The combination of elevated costs, tighter regulation, weaker public capacity, and more cautious private capital means the formulas that once delivered Canary Wharf or Manchester’s renaissance are no longer fit for purpose. A ‘fourth phase’ of regeneration, with a different modus operandi, is starting to take shape.

“The public sector is going to have to move up the risk curve and take a more active role in regeneration – similar to the eighties and nineties, but more locally led.” – Local Authority Head of Regeneration

ACCESS THE RESEARCH

Britain’s cities have undergone a remarkable reinvention over recent decades. Once characterised by derelict Victoriana or post-war concrete, many urban centres have been reshaped through large-scale transformative projects, this report’s definition of regeneration.

Heritage buildings have been repurposed; new quarters provided with high-quality public space, anchored by cultural institutions; and city living has become mainstream. These efforts have helped turn such locations into vibrant destinations that attract investment.

But this transformation is uneven and fragile. Gleaming new buildings sit cheek-by-jowl with obsolescent, empty buildings and deprived enclaves, while local authority budgets are under extreme pressure.

Cities and towns have ambitious plans to continue to address these problems. But since the pandemic, rising construction and debt costs, stalled projects, and slowing demand have undermined progress. The sense is growing that Britain’s urban fabric is beginning to fray.

Nevertheless, there is optimism – and not without reason. Some projects are making progress despite the headwinds; others are creating inventive frameworks and approaches to enable it in the future. This report explores the state of regeneration across the UK – and the future of it – by drawing on:

Site visits to eight major regeneration projects – Elephant Park, Old Oak Common, Royal Albert Dock (London), Bradford, Dundee, Liverpool, Brabazon in Filton near Bristol, and Harlow.

• Interviews with practitioners and stakeholders directly engaged in delivering, financing, and planning regeneration.
• Together, these sources provide a grounded picture: the old regeneration models no longer work, and a new approach needs to emerge.

This research report provides insight into the complex problems surrounding urban regeneration across the UK. For investors, developers, and local authorities, this is not just analysis – it’s a roadmap for action. We highlight where opportunities lie and how you can position yourself to drive the next phase of regeneration.

Click HERE to read the complete research or explore the executive summary HERE. You can also contact Jon or the wider Montagu Evans team to discuss more.

*This research has been prepared for general information purposes only. It does not constitute any investment, financial or other specialised advice or recommendations, and you should not, therefore, rely on its contents for such purposes. You should seek separate professional advice if required.

 

2) OVERVIEW

Housing starts in London have collapsed: According to Molior, only 3,248 homes began construction over the first nine months of 2025, equivalent to just 11% of the recent average and under 5% of the government’s target. Affordable housing delivery has fallen back even more sharply.

This is a crisis with huge implications for the living standards of Londoners, the economy of the capital, and the robustness of its construction industry and supply chains. Given the city’s central role in both housing delivery and the national economy, it needs urgent attention at both central and local government levels.

What are the reasons for this collapse?

• Regulatory delays: Building Safety Act and Gateway processes have created bottlenecks, with only 9% of tall building applications approved since 2023.
• Viability challenges: Construction and debt costs have surged, while residential land values have dropped. Regulatory burdens and inflexible affordable housing quotas make schemes unprofitable. Land values are now not high enough to convince owners to sell, and in some cases are negative.
• Weak demand: Overseas investors have retreated, domestic buyers face affordability constraints, and unsold stock is building up. Prices have not fallen in response to lower demand as developers have tried to keep sites profitable. This is not giving the wider market the confidence to proceed.
• Affordable housing crisis: Grant funding is insufficient, quotas are too high, and Registered Providers lack the capacity to take on s106 units. As so many sites in London are mixed tenure and in flatted blocks, affordable housing is tied to private delivery more than elsewhere in the country.
• Market shift: Developers currently prefer lower-density suburban projects, which in London are prevented by green belt constraints; incentives, not regulation, are needed to induce more urban development.

The multifaceted nature of the crisis poses a deeper question: is London’s residential development model broken? Does it need to be rethought from the ground up?

London’s failing development model

London’s current development model has only really existed since the 2000s and relies on rising land values, high affordable housing quotas, and off-plan investor demand. This paper argues that this is now broken owing to economic, regulatory and market changes.

Private development has become unviable owing to increased costs, weaker demand and regulatory delays. Affordable housing faces similar problems; grants no longer make construction viable, Registered Providers are not taking on new stock, and in any case, provision in mixed-tenure schemes would be held back anyway by private sector issues.

The Government has introduced some welcome temporary measures aimed at kickstarting activity in London. These will be much more impactful than many in the market are assuming; while modest individually, acting together, they strongly support viability. There is still a need for a wider rethink of how London’s planning system delivers and regulates housing development if government targets are to be met in the longer term.

ten Recommendations for Policymakers

Our recommendations for the longer term include:

1. 1. Accelerate Gateway and planning processes.
   2. Relax the requirement for late-stage viability reviews.
   3. Reinstate Section 106BA reviews for viability reassessment.
   4. Offer relief from the Mayoral CIL as well as the local CIL.
   5. Extend recent measures to co-living and student accommodation to encourage more affordable housing delivery.
   6. Utilise public sector investment to unlock pension fund capital and accelerate plans for a National Housing Bank.
   7. Introduce some form of buyer support.
   8. Release low-quality green belt land for gentle density housing around stations.
   9. Further review design rules and space standards to permit higher density in Inner London, in particular.
   10. Update income ceilings for affordable housing access.

London Housing Model

Policymakers must recognise that in a world of higher interest rates, more attractive alternative investment options, and a weaker economy (at least in the short term), London property and land values can no longer be mined to the extent they were in the past, or expected to absorb the impacts of more costly and stringent regulation.

Attempts to do so will lead to even more stalled development in the future and a continued crisis in affordable housing provision, which in the capital is so linked. This is not just about viability; low land values will not incentivise owners to sell to developers, particularly in areas where alternative uses compete.

There will still be planning gain, which can justifiably be used for affordable housing and other social goods. But now and in the future, these may not be as large as in the past.

Instead, the new model must:

6) Conclusions

The measures announced in September are a strong step in the right direction and together are much more effective than when considered in isolation.

But a combination of the recommendations above will also be needed to stimulate much-needed development in the longer term. and contribute to London’s economy and the well-being of its residents.

This raises the question of whether a deeper rethink is required. Private development at scale in much of London is a relatively new phenomenon. It has always been based on very different factors from most of the rest of the country.

These include:

• End prices that were assumed to be very high and constantly rising
• Investors (mostly but not exclusively overseas-based) buying off-plan, ‘unlocking’ finance for the development
• Support from Help-to-Buy in lower value locations (mostly Outer London), where investors were less active and affordability was less stretched
• Relatively strong demand from domestic owner-occupiers and, at times, from institutional investors (through build-to-rent)
• Very high land values (produced by the above) that could be used to provide large amounts of affordable housing and CIL revenue

In a world of higher interest rates, alternative investment options, and a weaker economy (at least in the short term), this model appears increasingly redundant. This rethink may require policymakers to think about how they can encourage and stimulate development in London, rather than how price increases can be used to support a growing list of wider objectives.

One of the overriding problems is that the post-war planning system was primarily designed with greenfield sites and new settlements in mind. The system we have for promoting and controlling urban development has been patched together according to a set of market conditions (and land supplies) that increasingly look historic.

Developers are unable to offer the prices that induce landowners, who are often in no rush to dispose of their long-term security, to sell. If residential land values fall below a certain point, other uses will become more appealing, or owners may simply opt to wait until conditions improve. This has huge ramifications for the supply of the raw material for development.

Aligning affordable housing so strongly with private development in London also means that it cannot act as a countercyclical stabiliser, helping to keep supply chains active and sites viable during market troughs (as appears to be happening in many other parts of the UK at present).

This paper does not argue that we should simply ignore planning gain. There will still be strong uplifts in land, created purely by planning consents, which can justifiably be used for affordable housing and other social goods. But now and in the future, these may not be as large as in the past, except in the most high-value areas.

In other words, we need a planning (and planning gain) system which: