The share of newly built homes “rebranded” before a single brick is laid has fallen to its lowest level in more than a decade, the latest blow to the government’s ambition to deliver 1.5 million homes by the end of this parliament.
Research published by estate agency Hamptons reveals that only 33 per cent of new properties across England and Wales are sold before completion by 2025, down from 49 per cent in 2016. consumer demand, and construction costs continue to rise.
Off-plan sales have long served as a lifeline for homebuilders, allowing developers to make bank deposits and secure funds before the project reaches completion. Their decline now threatens to increase the cost of capital across the industry at a time when ministers are aiming to speed up delivery.
The reduction was fueled, in large part, by the gradual withdrawal of buy-to-let investors who had been aggressive buyers of unplanned stock, particularly apartments in redevelopment areas. The introduction of a second stamp duty of 3 per cent in 2016 began to rot. That fee was increased to 5 percent by the end of 2024, and the Tenants’ Bill of Rights, which went into effect this month, has prompted another wave of landlords to look to move out to fight rising costs and ever-tightening regulations.
First-time buyers, another traditional pillar of the off-plan market, are similarly hamstrung. Unchained and flexible in time, they have historically been natural candidates for purchases months before completion. But the high cost of borrowing, coupled with the closure of the government’s Help to Buy equity loan scheme in 2023, has put many of them out of the picture altogether.
The pain is greatest in the apartment sector, where the investor and the first-time buyer usually want to match. Only 22 percent of new apartments were sold through last year’s program, a dramatic drop from 54 percent in 2007.
Investors who are still in the game are increasingly looking to the north, where rental yields comfortably exceed those found in the southern regions. In Oldham, Greater Manchester, 94 per cent of new flats were sold through the scheme last year, the highest share of any local authority in the country. London, by contrast, holds 65 percent.
David Fell, a leading analyst at the Hamptons, warned that the shift to high-rise apartments is creating new obstacles for ministers. “This step towards the development of small people, led by houses, may make it difficult for the government to strengthen the construction of houses,” he said.
Housebuilders, increasingly wary of carrying large blocks of flats on their balance sheets while waiting for buyers, are instead turning to urban housing projects that sell more quickly and reduce exposure to rising finance costs. A Department of Housing assessment published at the end of March predicted the government would fall short of its target of 1.5 million homes by around 400,000.
Financial statistics are increasingly punishing developers. Interest rates on construction loans are typically much higher than those attached to standard residential mortgages, meaning that each week the property remains unsold during the construction phase adds materially to the cost base. Hamptons calculates that additional finance costs added £3,125 to the cost of building each home last year, up from £2,934 in 2024. About half of that increase, he says, is directly attributable to higher interest rates.
Material costs have piled further pressure on the sector. “Many of the materials needed to build new homes are energy-intensive, meaning their costs have risen faster than broad inflation,” Fell added.
A separate study from the Home Builders Federation emphasizes the compression scale. The trade association calculates that the cost of building a new home will increase by an average of £76,000 from 2020, equivalent to 20 per cent of the total cost of building an average UK home. About 40 percent of that increase, it says, is due to government regulations and taxes, and the balance is accounted for by inflation and labor costs.
Financial consultancy RSM UK is among those calling on ministers to take decisive action to revive momentum, with a particular focus on reform, easier regulation and lower taxes for new construction.
Stacy Eden, partner and national head of real estate at RSM UK, said the image would deteriorate further without intervention. “As costs will continue to rise due to the economic impact of the Iran conflict, the real estate industry urgently needs government support to make housing successful,” he warned.
For home builders who are SMEs in particular, who do not have the deep balance sheets of volume players, the squeeze on unplanned sales risks putting inefficient sites to the economy, which threatens both jobs and the government’s ambitions for housing.
