The share of new homes sold off-plan across England & Wales fell to their lowest level in a decade last year, data from Hamptons shows.
The estate agent says 34% of new homes were sold in advance of completion last year, down from a peak of 46% in 2016 — and is the lowest since 2013.
This is the fifth time in the last six years that the proportion of new homes sold off-plan have slipped.
The fall “reflects a steady decline in investors who are the most likely group to buy off-plan,” says the firm.
It points out that the decline can be traced back to 2016 and the introduction of a 3% stamp duty surcharge on second homes.
In 2015, 70% of off-plan buyers were investors, but this fell to 21% last year. Meanwhile, first-time buyers made up 67% of off-plan purchases in 2022.
The agent adds that this decline has affected the type of homes bought off-plan.
It says: “Traditionally, flats made up the bulk of off-plan sales. They offered the highest yields for investors buying into developments two or three years in advance of completion.
“However, fewer investors have meant fewer off-plan flat sales.”
In 2007, flats accounted for 71% of all new homes sold off-plan, a figure which fell to 53% by 2016.
The firm says, by 2022, that share dropped to just 38% “on the back of a more aggressive tax environment for investors.
“This also reflects the Covid-induced shift where owner-occupiers are looking for houses with more indoor and outdoor space.”
The agent adds that the shift away from investors in combination with a change in where they were buying means that “for the first time since at least 2007”, new terraced houses, at 46%, have been more likely to sell off-plan than flats, at 44%.
In London, where flats make up over 90% of new homes, “for the first time in at least 15 years,” the capital didn’t account for the largest proportion of new homes sold off-plan.
Last year 44% of new homes in London were sold off-plan, down from a peak of 71% in 2016.
This figure was topped by the North West where 45% of homes were sold in advance of completion in 2022, a similar level to 2016.
Hamptons lead analyst David Fell says: “Smaller new houses are now more likely to be sold off-plan than flats. This reflects Covid-induced changes alongside a shift in who is willing to buy before a new home is completed.
“Off-plan demand has steadily moved away from investors buying two or three years in advance towards first-time buyers who are typically looking to move home within 6 to 12 months. The majority, however, still want to wait to see a finished product.
“Slowing rates of price growth have also reduced the incentive for some buyers to get in early. A decade ago, investors buying well in advance of completion often saw the value of their new home rise 20% to 40% between exchange and completion.
“But as price growth has slowed, buyers have in general become less willing to commit to purchases years in advance of completion. “Overall, the continued slowdown in the number of new homes sold off-plan coupled with the end of Help to Buy is hitting most housebuilder’s bottom lines.
“Slowing sales rates mean that some developers are slowing down the pace of work in order to reduce their risk.
“Without a relaunch of [the government’s] Help to Buy [scheme] or replacement with a similar scheme, in the short term it’s likely to mean far fewer homes will be built in 2023 than there have been over the last couple of years.”
