Property consultancy Hamptons says around 32% of new homes sold in England and Wales last year were snapped up before completion
Off-plan house purchases have plunged in the past year – and that’s largely due to higher mortgage rates.
Property consultancy Hamptons says around 32% of new homes sold in England and Wales last year were snapped up before completion. That’s the lowest percentage since 2013.
The situation is more drastic still in London where fewer than half of new homes sold last year had been bought off-plan – the lowest since 2012.
Hamptons says higher mortgage rates are to blame, squeezing new home buyers harder than most, as they are considered to be the most financially-stretched of all property purchasers.
Apartments still dominate the off-plan sector, as per Hamptons, with 45% more likely to be sold before completion than terraced houses. Nonetheless, bigger homes experienced the sharpest declines in off-plan sales, pulling down the share of homes sold before completion from 39% a year earlier.
Hamptons new build analyst David Fell notes: Off-plan sales are the foundation of most house builders’ businesses. This means selling fewer homes before they are built is bad news for their bottom line.
In what’s a cash-intensive business, house builders typically borrow to build homes, paying it back when they are sold. But with more homes only sold after they are finished, it means developers are borrowing money for longer and at higher interest rates. With off-plan sales harder to come by, housebuilders have responded by slowing build rates to preserve capital and make sure they are not left with large numbers of unsold finished homes.
He says: In a world of low-interest rates, incentives that cut the size of the deposit were the magic bullet to help buyers into homeownership. Even buyers with a 5% or 10% deposit found mortgage repayments were much cheaper than renting a similar home.
The post High mortgage rates trigger fewer off-plan house sales first appeared on Invest for Property London, Buy Residential property UK.
Credit: Source link
