Prime London buyers are becoming increasingly willing to consider refurbishment opportunities as a shortage of high-quality homes limits choice at the top end of the market, according to Knight Frank.
The shift creates potential opportunities for developers, investors and specialist lenders able to fund the acquisition and improvement of properties in London’s most expensive locations.
Knight Frank says the development pipeline in prime central London (PCL) has contracted by 70% over the past decade. A more challenging planning environment, higher construction costs and falling property values have all affected the viability of new schemes.
This shortage means buyers who might previously have focused exclusively on completed, turnkey properties are now considering homes requiring significant improvement.
REFURBISHMENT MOVES UP THE AGENDA
Stuart Bailey (main picture, inset), head of prime central London sales at Knight Frank, says: “Exceptional properties are in short supply which means buyers who were previously unwilling to consider refurbishment projects are doing so to ensure they get what they want.
“Many buyers at the top end of the market can spend one or two years looking for their ideal home, so even if it doesn’t exist right now, the opportunity to create it does.”
The trend could support demand for refurbishment and development finance, particularly where buyers need to complete quickly before undertaking extensive works.
Such projects can require flexible funding structures where mainstream residential mortgages are unsuitable because of the property’s condition, the scale of the proposed works or the borrower’s wider financial circumstances.
ACTIVITY SHOWS SIGNS OF RECOVERY
The changing priorities emerge as activity across the prime London market begins to improve following a subdued summer in 2025.
The number of transactions across London rises by 14% in the three months to July compared with the same period last year, while activity in PCL increases by 3%.
However, exchanges remain 7% below the same period in 2024 across both London and PCL. Compared with the five-year average, exchanges are 6% lower across London and 15% lower in PCL, although Knight Frank says pandemic-era stamp duty deadlines and the repricing of mortgages distort that comparison.
LOWER VALUES MAY CREATE OPPORTUNITIES
Average prices in PCL are now 23% below their previous peak in mid-2015 following a succession of tax changes and periods of political uncertainty.
Prices fall by a further 3.3% in the year to July, marking the 39th consecutive month of annual declines.
While this continues to put pressure on development viability, lower acquisition values combined with a scarcity of exceptional completed homes could make refurbishment-led strategies increasingly attractive to experienced developers and buyers with access to specialist finance.
