Around 32% of new homes were sold before they were built in England and Wales last year, down from 39% in 2022 and the lowest in ten years, as per Hamptons International
Higher interest rates have caused off-plan home sales to decline in the UK, prompting the nation’s housebuilders to scale back development.
Around 32% of new homes were sold before they were built in England and Wales last year, down from 39% in 2022 and the lowest in ten years, as per Hamptons International. That’s bad news for developers, which have been slowing build rates to preserve capital and make sure they are not left with large numbers of unsold homes, the broker added.
With more homes only sold after they are finished, it means developers are borrowing money for longer and at higher interest rates, according to David Fell, lead analyst at Hamptons. This means the government is not likely to get close to reaching its housebuilding targets until interest rates decline significantly.
Off-plan sales are essential for developers’ cash flow, bringing money into the business before units are complete and allowing them to borrow money to fund more construction. The share of new homes sold off-plan peaked at 47% in 2016, but a jump in mortgage rates and cost-of-living pressures have squeezed buyers of new homes harder than most in the last 18 months.
In London, fewer than half of new homes were sold before being built last year – the first time off-plan deals have dropped below 50% in the capital since 2012, the report added. BTL investors have made up a dwindling share of off-plan purchases over the last few years, as higher borrowing costs and tougher regulation push some landlords out of the market.
Flats were more likely to be sold off-plan than terraced houses for the first time since the pandemic in 2023, as pricey mortgages meant FTBs took smaller steps up the housing ladder. Just 22% of detached homes and 31% of semi-detached homes were sold off-plan last year, an eight and ten percentage point decline respectively from 2022.
Still, the UK’s biggest homebuilders have noted signs of recovery in the housing market so far this year. Vistry Group reported an increase in its average weekly private sales rate earlier this month, following a similar optimistic tone struck by rival Persimmon in April.
The post Higher interest rates prompt fewer off-plan home sales first appeared on Invest for Property London, Buy Residential property UK.
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