A limited supply of homes on the market fuelled a six-year high in off-plan sales last year, new research has shown.
The share of new-build homes in England and Wales sold before being built or completed surged to over a third – or 37 percent — in 2021, according to analysis by estate agent Hamptons.
Last year buyers handed over a record £1.1bn in deposits to secure homes before they were built, with the highest numbers of sales seen in off-plan hotspots like the Cotswolds, Southwark and Hackney.
This is close to the peak of 2016, when 39 per cent or 69,000 new homes were sold off-plan. Numbers have been falling steadily since then and hit a low of 33 per cent in 2020.
The lack of available properties in London is already playing havoc in the rental market, as the lack of supply combined with a post-pandemic move back to the city sends rents soaring.
In the sales sector, Hamptons’ senior analyst David Fell said the lack of available homes on the market is pushing buyers towards new-build developments. This shift also means owner-occupiers are now driving a market traditionally dominated by investors.
He said: “After nearly four years of falls, the rise in off-plan sales will provide respite for developers looking to maintain sales rates as Help to Buy winds down.
“Whether this shorter-term shift has the potential to turn into a longer-term trend remains to be seen, but unlike the past, it’s owner-occupiers rather than investors who are likely to continue driving off-plan sales in 2022.”
London had two boroughs in the top ten spots for off-plan sales in England and Wales. In Southwark, 67 per cent of homes were sold off plan last year while in Hackney, another development hotspot, 65 per cent of homes were sold off-plan.
But the highest numbers were seen in the Cotswolds, which has some of the lowest stock levels in the country. Here, a huge 86 per cent of new homes completed last year were sold before they were built. Other areas in the top 10 include Monmouthshire, East Hertfordshire and Gravesham.
The rise in off-plan sales has been driven by the sale of more houses, rather than flats, sold before completion. The data shows 24 per cent of new detached home completions were sold off-plan in 2021, compared to 21 per cent in 2020.
The proportion of flats sold off-plan dipped slightly, meaning for the first time since 2007, a terraced house was more likely to be sold off-plan than an apartment.
The shift from flats to houses reflects homeowners’ preferences, according to Fell. This type of buyer also will not buy as far in advance as investors, who are happy to wait a year or two for the property to be built.
‘They’re also more likely to seek out bespoke, individually designed houses in smaller schemes, rather than flats in big city centre blocks’, he added.
Developers rely heavily on selling homes off-plan, which allows them to generate an income stream before the scheme is complete and use the money to fund ongoing works. As it carries more risks, buyers usually get better deals if they buy new-build homes before they have been constructed.
