The proportion of homes sold “off-plan” increased in 2021, according to analysis by estate and letting agent Hamptons.
Some 37 per cent of new homes sold in England and Wales found a buyer before completion, up from 35 per cent in 2020, estate and lettings agent Hamptons found.
While this figure is still below a 47 per cent peak recorded in 2017, it reversed the subsequent downward trend, Hamptons said.
For the first time since 2007, a terraced house was more likely to be sold off-plan than an apartment, it also found.
Nearly a quarter (24 per cent) of new detached home completions in 2021 were sold off-plan compared with 21 per cent in 2020.
The lack of second-hand homes available to buy has meant that owner-occupiers are increasingly turning to new builds, with more willing to buy off-plan in the face of limited options on the market.
For semi-detached properties, the figure rose from 31 per cent to 33 per cent and for terraced homes the proportion of off-plan sales increased from 41 per cent to 45 per cent.
The proportion of flats sold off-plan, meanwhile, bucked the trend, experiencing a fall from 50 per cent to 44 per cent.
Off-plan purchasers are increasingly likely to be owner-occupiers seeking houses rather than flats, Hamptons added.
Off-plan buyers typically hand over a standard 10 per cent deposit on exchange of contracts, with the balance payable on completion. Last year, buyers collectively paid £1.1 billion in deposits to developers for homes that had yet to be built, Hamptons calculated. This is around three times the £348 million handed over in 2007.
Following last year’s increase in off-plan sales, some in the industry are now predicting that off-plan sales could return to the record-setting levels of the past due to ongoing market conditions including a surplus of would-be buyers for “second hand” homes.
Of course, nothing is simple, and from a buyer’s perspective buying off plan does come with its fair share of pros and cons:
* Buyers can secure a property at today's price. If property prices go up you gain before you’ve even moved in.
* Possibility of getting a good deal. Developers often sell the first off-plan properties on a development at a keen price to get some money in.
* Possibility to part exchange an existing house or benefit from some kind of assisted move programme offered by the developers.
* Buyers may be able to take advantage of government incentives, such as Help to Buy.
* Buyer has a formal agreement to buy so the sale is very unlikely to fall through. They can start planning the move with confidence and are less likely to be affected by a broken chain.
* New homes are built to the latest designs and have the latest tech. They are also much more energy efficient.
* While first release new homes are indeed often sold at a bargain price by developers keen to boost cash flow, later releases are often sold at the “new build premium.” This could eliminate any profit due to price rises.
* Buyers don't know exactly what an off-plan house or the area will look like until it is finished.
* There may be delays in completion. (Current reasons include labour shortages, supply chain issues, weather, Covid, Brexit, energy crisis, etc.) Developer contracts usually have a 'get out clause' if they need to delay which can cause broken chains, expired mortgage offers, etc. Buyers can rarely delay once the home is complete.
* New “period” properties often have a lack of character and a reputation for not being very well built.
* Buyers may be living on/near a building site for several months/years after they move in.
* New build properties often come with faults/ snagging issues.