The UK housing market is showing increasingly clear signs of strain, particularly at the lower end, with a glut of unsold flats weighing on prices. While a nationwide crash isn’t yet guaranteed, a significant correction, especially for newer apartment developments, appears to be underway.
The situation is particularly acute in London, where a sharp drop in flat prices is becoming evident. Areas like Nine Elms, once touted as a ‘Dubai-on-Thames’ with substantial investment in new developments and infrastructure – including a new US Embassy and a Tube station – are now facing a stark reality: hundreds of apartments remain empty, and sales are sluggish. Estate agents are reporting a lack of buyer interest, with some properties languishing on the market for years.
The decline isn’t limited to London. Nationwide, flat prices are lagging behind those of houses. While houses have seen a nearly 40% increase in price over the past nine years, flats have only risen by 11%. This divergence suggests a fundamental shift in buyer preferences and market dynamics.
Several factors are contributing to this downturn. Soaring service charges, often increasing by as much as 40% in the last five years, are deterring potential buyers. These charges, coupled with concerns about cladding safety following the Grenfell Tower tragedy, and the financial burden of stamp duty, are making apartment ownership less attractive. The ongoing complexities surrounding leasehold reform, despite the government’s proposed Draft Commonhold and Leasehold Reform Bill, add to the uncertainty.
The quality of construction in some new-build developments is also under scrutiny. Concerns about long-term durability and potential defects are leading buyers to question the value proposition of these properties. The recent court case involving residents of One Hyde Park, who successfully sued the contractor over defective pipework, underscores these concerns even at the luxury end of the market.
The broader economic climate is exacerbating the problem. The general economic and political instability, combined with rising interest rates – which peaked at 5.25% in 2023 before falling to 3.75% currently – are making potential buyers more cautious. The increase in mortgage costs has significantly impacted affordability, further dampening demand.
The impact is particularly pronounced for those who purchased new-build flats in recent years. Research indicates that two in every five owners of flats bought in the last 20 years sold at a loss last year. In Hammersmith and Fulham, two-thirds of new-build flat sales resulted in a loss in 2025. Even older properties are not immune, with nearly one in five flat owners who bought within the past two decades selling at a loss.
Specific examples illustrate the extent of the price reductions. A two-bedroom maisonette in Kentish Town, London, initially listed for £800,000 in March 2025, is now available for £525,000. A flat in Fulham, purchased for nearly £1.3 million in 2016, is currently on the market for £775,000. Properties in other cities, such as Liverpool and Birmingham, are also experiencing significant price cuts.
While these reductions present an opportunity for some first-time buyers, the potential for further price declines is creating hesitation. The fear of negative equity – owing more on a mortgage than the property is worth – is a significant deterrent.
The situation raises concerns about the wider economic impact. A weakened property market can lead to reduced consumer spending, as less money circulates through related industries such as furniture, appliances, and moving services. The stagnation of the property ladder, particularly at the first rung, could have long-term consequences for economic growth.
The current challenges facing the flat market are a result of a confluence of factors: oversupply, rising costs, construction quality concerns, and broader economic headwinds. While government reforms aimed at addressing issues like leasehold and service charges may offer some relief, a significant recovery appears unlikely in the short term. The market is facing a period of adjustment, and the prospect of a prolonged downturn for the flat sector is becoming increasingly real.
