Off-plan sales index

Small houses are more likely to be sold off-plan than flats, as the proportion of new homes sold before completion falls.

Published under Research — May 2023
Off-plan sales index

For the first time since at least 2007, small new houses are now more likely to be sold off-plan (before they’re built) than flats. Last year 46% of newly built terraced homes were sold this way, compared to 43% of flats. This reflects Covid-induced changes alongside a shift in who is willing to buy a new home before it’s completed.


In the past, investors were the main buyers of off-plan homes. In 2015, 70% of off-plan purchases were made by investors, but by 2022, that share dropped to 21%. This was predominantly due to a more aggressive tax environment which reduced the number of buy-to-let investors.

Flats have traditionally been particularly popular with investors because typically they provided the highest yields when buying into developments two or three years before completion. Consequently, back in 2007 flats accounted for 71% of all new homes sold off-plan, a figure which fell to 53% by 2016.

With fewer investors buying off-plan homes, the share of homes sold this way has been slowly decreasing. In 2022, just over a third (34%) of new homes across England and Wales had been sold in advance of completion, down from a peak of 46% in 2016 and the lowest level since 2013. This is the fifth time in six years that this proportion has fallen.

This shift, which has been playing out over several years, reflects a change in who is willing to buy before a new home is completed. Off-plan demand has been steadily moving away from investors buying two or three years in advance of completion, towards first-time buyers who are typically looking to move home within 6-12 months.

The lack of homes available to buy on the second-hand market over the last few years has encouraged more owner-occupiers to consider a new build. Consequently, first-time buyers made up just over two-thirds (67%) of off-plan purchases last year. Since many of these buyers now work from home, they want extra space. This is fundamentally why more small houses are sold than flats before they're built.


However, off-plan sales are still popular in high-yielding areas. Some of these development that cater exclusively to investors continue to see off-plan sales hold up most strongly.

Around 200 developments accounted for half of the off-plan sales nationally. The proportion of new homes sold off-plan in areas where average buy-to-let yields sat above 8% increased year-on-year, while a record 50% of new homes sold in advance of completion were in places where average yields surpassed 10%.

This means off-plan sales in Northern England, where landlords have headed in increasing numbers for yields which work with higher interest rates, have remained most resilient. As a result, flats outside London are now more likely to be sold off-plan (44%) than those in the capital (43%).

London offers investors the lowest average yields in England and Wales, so off-plan demand there is driven more by owner-occupiers than anywhere else in the country. However, off-plan sales have also held up more strongly in higher-yielding parts of the South.

Slower price growth has also reduced the incentive for some buyers to get in quite so early. A decade ago, investors saw the value of their new home rise 20-40% between the time they agreed to buy and completion. But as price growth has slowed, all types of buyers have become less willing to commit to buying properties so far in advance.


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