Most buyers of new builds pay a standard 10% deposit on exchange of contracts, with the balance payable on completion, and last year buyers handed over a record £1.1bn in deposits. This is three times the £348m paid in 2007 and has been pushed up by rising property prices and more houses being sold off-plan.
Indeed, the key reason behind the growth in off-plan sales is the rise in house purchases. In 2021, 24% of detached home completions were sold off-plan, compared to 21% the previous year. Off-plan sales of semi-detached houses rose from 31% to 33% and went from 41% to 45% for terraced houses.
Meanwhile, the proportion of flats sold before completion dropped from 50% in 2020 to 44% last year, marking the first point since 2007 when a terraced house was more likely to be sold off-plan than an apartment. This means that, of all homes sold off-plan, 37% are now flats, down from 53% in 2016 and the 69% peak in 2008.
Before 2016, when the 3% surcharge on second-home purchases was introduced, off-plan sales were driven by investors. These days, however, off-plan buyers are increasingly likely to be owner-occupiers seeking houses – a trend heightened by the pandemic, says Sue Fisher, Hamptons’ Head of Residential Development, Greater London and Country.
“Buyers are seeking properties with gardens and space to work from home and developers have been altering plans accordingly,” Fisher explains. “Houses are like precious metal right now and it’s very easy for us to secure sales off-plan as long as they are in locations commutable to London.”
A rising number of purchasers are also looking for individuality, with smaller schemes of fewer than 10 homes seeing the largest rise in off-plan sales – from 19% in 2020 to 25% in 2021. The proportion of homes sold off-plan in larger developments of 50-plus homes remained static at 70%.
Cotswold District, where houses are increasingly likely to be sold off-plan and stock levels are the lowest in the country, saw the most off-plan sales. Here, 86% of new homes completed last year had been sold before being built. Five years ago, six of the top 10 local authorities with the highest proportion of off-plan sales were in London, but in 2021 this fell to two.
Nevertheless, there is still a good appetite for buying off-plan in the capital, says Tom Hawkins, Hamptons’ Head of Residential Development, Central London. “Now Covid restrictions have eased, the international market is more buoyant and many purchases are made with two aims: both as an investment and as somewhere for children to live in the future,” Hawkins says. “People who wouldn’t have considered new builds before are also increasingly citing energy efficiency as a key reason for buying.”
*Hamptons data
