Off-plan sales for new homes across England and Wales have fallen to their lowest point in 12 years, now representing just 33% of new build transactions. This marks a significant decline from a peak of 49% recorded a decade ago, highlighting a notable shift in the new homes market. The data indicates a broader trend away from purchasing properties before they are completed, a method often favoured by developers to secure funding and gauge demand.
This downturn in off-plan sales is primarily being driven by a change in the types of homes being built and sold. There has been a distinct move away from the development of flats towards a greater emphasis on houses. Flats often lend themselves more readily to off-plan sales, particularly in urban centres where density is higher and investor interest can be strong. The preference for houses suggests a market responding to different buyer demands, potentially from families or those seeking more space, which may also reflect evolving work-from-home trends post-pandemic.
The implications of this shift are considerable, particularly concerning the Government's ambitious housebuilding targets. For years, successive governments have aimed to increase housing supply to address the national shortage and improve affordability. The decline in off-plan sales, coupled with a focus on house construction over flats, could hinder the pace of development, as flats typically allow for a higher density of homes on a given plot of land. Meeting these targets becomes more challenging if the preferred development model is less efficient in terms of units per square metre.
For first-time buyers, particularly those in urban areas, this trend could mean fewer new-build flats available, which have historically been a more accessible entry point into homeownership. Schemes like Help to Buy, which concluded in England in March 2023, often supported purchases of new-build flats. Without this support and with fewer flats being built, affordability challenges could be exacerbated. Existing homeowners might see a slower pace of new development in their areas, potentially impacting local infrastructure and services, while landlords may find fewer opportunities for new-build flat investments, which have often offered attractive rental yields in city centres.
The broader housing market continues to face headwinds from elevated mortgage rates, despite recent stabilisation. For instance, Halifax reported average UK house prices fell by 0.1% in April 2024, with the average home costing £288,949. While this shows relative stability, the underlying cost of borrowing remains a significant factor for buyers. The shift in new build types and sales methods adds another layer of complexity to an already intricate market, influencing everything from urban planning to individual purchasing decisions.
Ultimately, the decline in off-plan sales and the shift towards house development underscores a changing landscape for UK housing. Developers are adapting to market signals, but this adaptation carries consequences for the overall supply of homes, the types of properties available, and the government's ability to meet its strategic housing objectives.