Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Solutions. Read the original article for full details.

Off-Plan Sales Hit 12-Year Low Amid Market Pressures

Off-plan sales have fallen to 33%, marking a 12-year low for the UK housebuilding market, according to data from Hamptons reported by Mortgage Solutions. The decline is attributed to a combination of planning delays, affordability pressures, and increased costs for developers.

The last time off-plan sales were this low was in 2013. The slowdown is not unexpected for those working in new homes, as ongoing planning hurdles and delays continue to impact the sector. The government has assessed that around 350 additional planners are needed to speed up the process, but the Home Builders Federation (HBF) suggests the requirement is more likely to exceed 3,000.

Affordability issues are affecting investors, homebuyers, and builders alike. The peak for off-plan sales was in 2016, when nearly half of all new-build homes were sold before completion. That year also saw the introduction of the second home stamp duty surcharge, which reduced investor demand for off-plan properties.

Owner-occupiers, especially in Southern regions where house prices and living costs are higher, are also feeling the strain. High rents and house prices mean first-time buyers are staying at home longer, and when they do buy, they are seeking larger properties to avoid future stamp duty costs. Flats have become less attractive due to concerns about ground rents, service charges, and limited availability of high loan-to-value mortgages. As a result, off-plan flat sales have dropped from 55% to 38% over the past decade.

Housebuilders are facing increased costs from regulation, materials, and a shortage of tradespeople. At the same time, they are competing with high levels of cheaper, second-hand stock in local markets. The cost of unsold homes is significant, with builders incurring additional finance costs, as well as ongoing expenses for council tax, site security, and maintenance of vacant properties.

Until market conditions improve to support viable construction, financing, and affordability, slower off-plan sales are expected to persist.