Property development in London can be very rewarding, both professionally and financially. However, it can also come with challenges and considerations specific to the capital, compared to the rest of the South East.
So what does a property developer need to think about when considering projects in London, especially if it’s the first time? What are some of the mistakes and pitfalls to avoid? And some of the unique factors in play?
Understanding what you’re getting into is vital before committing, so let’s find out.
Land Acquisition
Arguably the hardest part of property development in London, finding and acquiring suitable land for development can be incredibly competitive and expensive. Whether you’re planning a new build, renovation or conversion, many sites can also come with complications.
For example, the most readily-accessible land in London tends to be brownfield sites, but these can come with issues around contamination, development restrictions or complicated ownership arrangements.
When we factor in increased competition from larger developers or housing associations, smaller developers can find themselves outbid. For prime locations or sites that already have planning permission, it can be extremely difficult to get a foot in the door.
Land in the Wider South East
Although land in the South East is in more demand than other parts of the country, it can be much easier than the capital. There is generally greater availability of both greenfield and brownfield sites, though Green Belt constraints remain significant across Surrey and parts of Kent and Sussex.
Savills’ Development Land Index Q3 2025 shows UK greenfield land values have remained broadly flat while brownfield land eased by around 1% in Q2 2025 year-on-year, amid higher costs and selective buyer demand.
This means that some South East locations may present opportunities for smaller developers who are being priced out of the capital.
London Planning Permission
Planning in London can be much harder to navigate. In 2025, Planning Resource found that London boroughs accounted for seven of the ten councils in England with the lowest planning application approval rates.
London has a dense urban environment, a relatively high proportion of listed buildings, and several conservation areas, as well as local authorities with various Article 4 Directions. These factors all add complexity (and cost) to planning applications that tend not to be seen in other areas of the South East outside of the National Parks and National Landscapes.
That said, obtaining planning permission in the South East can still be complicated, albeit more predictable. For example, even though there are environmental protections like Biodiversity Net Gain or Water Neutrality in Sussex, the various local plans are often clearer, and pre-application engagement with local authorities can help avoid costly mistakes and delays.
Financial Obligations & Affordable Housing Targets
Community Infrastructure Levies
London is unique in the South East because developers are subject to both a Community Infrastructure Levy (CIL) at the borough level, as well as a Mayoral Community Infrastructure Levy (MCIL), which is used to repay the financing of the Elizabeth Line.
MCIL is calculated on the net new floorspace, measured in square metres of Gross Internal Area, and rates vary depending on where in London the development is:
- Zone 1 – £80m²: Camden, City of London, City of Westminster, Hammersmith and Fulham, Islington, Kensington and Chelsea, Richmond-upon-Thames, Wandsworth
- Zone 2 – £60m²: Barnet, Brent, Bromley, Ealing, Enfield, Hackney, Haringey, Harrow, Hillingdon, Hounslow, Kingston upon Thames, Lambeth, Lewisham, Merton, Redbridge, Southwark, Tower Hamlets, Waltham Forest, London Legacy Development Corporation (LLDC), Old Oak and Park Royal Development Corporation (OPDC)
- Zone 3 – £25m²: Barking and Dagenham, Bexley, Croydon, Greenwich, Havering, Newham, Sutton
This means London property developers are subject to a dual charge that developers operating elsewhere are not.
Affordable Housing Requirements
London developers are subject to affordable housing obligations through Section 106 agreements that are typically higher than elsewhere. This can place additional pressure on developers.
However, the Housing Secretary and Mayor of London introduced emergency measures in March 2026 aimed at accelerating housebuilding. The time-limited measures introduced include:
- A fast-track planning route for sites delivering at least 20% affordable housing. This is open to validated applications that are submitted by 31 March 2028.
- Temporary relief from the Community Infrastructure Levy for eligible schemes that meet affordable housing targets, with additional relief for those going further. This will apply to eligible schemes commencing before 31 March 2030.
- Removal of targeted Greater London Authority (GLA) guidance that can constrain density and delay delivery of homes on land already earmarked for development.
Material & Labour Costs
Material and labour costs can be noticeably higher in London compared to elsewhere, and this can impact smaller developers in particular.
For example, Turner & Townsend’s Global Construction Market Intelligence (GCMI) Report 2025 found that London was the fifth most expensive place to build in the world, with an average cost of £4,163 per m².
By comparison, the average cost in the rest of the UK sits between £1,750 and £3,000 per m², although the South East will be at the higher end of this. What’s more, the January 2026 BCIS Construction Industry Forecast predicts that building costs will rise by 15% by 2030.
There can be many reasons for this. For example, working in tightly constrained urban sites can involve things like crane hire, scaffolding in narrow streets, restricted delivery hours or employing specialist subcontractors. Similarly, delivery charges and wages tend to be higher.
Obtaining Development Finance in London
All of these considerations for property development in London can increase the overall cost of the build, which in turn can make it harder to secure development finance. Larger loans, longer repayments and higher contingency requirements can price small- and medium-sized developers out.
However, finding a partner with a strong understanding of the London construction and property market is vital. It can make the difference between a successful project and one that doesn’t even get past the planning stage.
At Hunter Finance, we work with ambitious developers across London and the South East, and have a range of development finance options to suit your project.
We can provide fast residential development finance loans up to £3 million. The process is simple with no hidden fees, and we can typically give you an Offer in Principle within 48 hours.
Contact us today to find out more and get your project off the ground.
