The proportion of new homes sold off-plan in England and Wales has dropped to its lowest level since 2013.
A total of 34% of new homes in England and Wales were sold before they were built last year, down from a peak of 46% in 2016.
It is the fifth time in the last six years that the proportion of new homes sold off-plan has fallen, according to the research carried out by Hamptons.
The estate agency, part of the Connells Group, attributed the decline to a fall in the number of buy-to-let landlords and property, who it said are the most likely group to acquire homes off-plan.
The company said 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, a figure that fell to just 12% in 2022.
At the same time, first-time buyers made up 67% of off-plan acquisitions last year.
In 2007, flats accounted for 71% of all new homes sold off-plan, but that figure dropped to 38% last year, which Hamptons suggested reflects the pandemic shift where owner-occupiers are looking for houses with more indoor and outdoor space.
Notably, with flats making up more than 90% of new homes in London, the capital did not account for the largest proportion of new homes sold off-plan for the first time in at least 15 years.
Last year, 44% of new homes in the capital were sold off-plan, down from a peak of 71% in 2016.
This figure was surpassed by the North West where 45% of homes were sold in advance of completion in 2022, a similar level to 2016.
At local authority level, it is higher yielding town and city centres where developers are catering to investor demand, which top the list of places where the highest proportion of new homes are sold off-plan.
Luton takes top spot for the first time with 83% of all new homes sold in advance of completion last year. Luton is followed by Manchester (72%), Birmingham (66%), Stoke (65%) and Brighton (61%).
Typically, flats still dominate off-plan sales here, predominantly in developments built specifically for investors. At the other end of the scale there were 57 (or 17%) local authorities where no new homes sold before completion. These were rural or
suburban places where new homes tend to be detached or semi-detached.
Nationally, these homes are least likely to be sold off-plan, with 23% of detached and 32% of semi-detached homes sold before being built.
David Fell, lead analyst at Hamptons, said: “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 6-12 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 20-40% 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 Help to Buy 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.”
