Hamptons’ latest annual off-plan sales index has revealed that 32% of new homes sold in England & Wales found a buyer before they were built last year, the lowest level since 2013. Off-plan sales are essential for housebuilders’ cash flow, bringing money into the business before homes are fully finished.

Higher mortgage rates have squeezed brand-new home buyers harder than most, given they are disproportionately likely to be stretching themselves to buy their first home or borrowing more to trade up. This has pulled down the share of homes sold before completion from 39% last year.

The share of new homes sold off-plan peaked at 47% in 2016, buoyed by investors rushing to beat the 3% stamp duty second home surcharge which came into force in April 2016. Since then, landlords have made up a progressively smaller share of purchasers and the share of new homes sold off-plan has fallen in all but one year (2021) since. First-time buyers outnumbered investors 2:1 among off-plan purchases last year, an exact reversal of the same ratio in 2016.

Higher mortgage rates have reversed pandemic-induced trends when buyers looked to buy bigger homes. Consequently, larger homes recorded the sharpest falls in off-plan sales last year. Buyers who had been stretching themselves to trade up have sat tight amid higher mortgage rates to keep their monthly repayments affordable.

Just 22% of detached homes and 31% of semi-detached homes were sold before they were built, recording an eight and 10 percentage point fall respectively between 2022 and 2023.

For the first time since the pandemic, flats were more likely to be sold off-plan than terraced houses, with 45% of flats sold off-plan last year, down from 50% in 2022.