The proportion of new homes snapped up “off plan” before a brick is laid has tumbled to its lowest level in more than a decade, in a stark signal that the buy-to-let exodus and stubbornly high borrowing costs are reshaping the new-build market.
Fresh research from estate agency Hamptons shows that just 33 per cent of new-build properties in England and Wales were sold before construction was complete in 2025, down from 49 per cent in 2016, and the lowest share since the early years of the decade.
The slide reflects a steady retreat by private landlords, who have long underpinned the off-plan sector. The 3 per cent second-home stamp duty surcharge introduced in 2016 began the process; the increase to 5 per cent at the end of 2024, followed by the Renters’ Rights Act coming into force this month, has accelerated it. For many smaller landlords, the maths no longer adds up.
First-time buyers, the other traditional source of off-plan demand, valued by developers for being chain-free and flexible on timing, have also been squeezed out. The end of Help to Buy in 2023 removed the equity loan that turned countless completions into sales, and elevated mortgage rates have done the rest.
Flats bear the brunt
The collapse has been sharpest in flats, the bread and butter of investor portfolios. Only 22 per cent of new flats were sold off plan last year, a dramatic fall from 54 per cent at the 2007 peak.
That figure tells two stories: weakening institutional demand for high-rise stock in the south, and a marked geographic shift northwards. Investors hunting for yield are increasingly bypassing London, where 65 per cent of new flats sold off plan last year, in favour of higher-yielding northern markets. Oldham, in Greater Manchester, topped the national table with an extraordinary 94 per cent of new flats sold before completion — the highest share of any local authority in England and Wales.
For investors with capital to deploy, the message is clear: the regional yield gap is now wide enough to override the convenience of buying close to home.
Builders pivot to suburban houses
Housebuilders, watching the off-plan tap close, are responding by quietly switching their pipelines. Fewer blocks of flats are being brought forward, with developers favouring lower-density suburban houses that sell more quickly to owner-occupiers and reduce exposure to spiralling financing costs.
David Fell, lead analyst at Hamptons, warned that the shift carries political consequences. “This move towards lower-density, house-led development is likely to make it harder for the government to significantly ramp up housing delivery,” he said.
The government has pledged 1.5 million new homes by the end of this parliament. A Ministry of Housing assessment published at the end of March predicted it would miss the target by 400,000 — and the off-plan slowdown points to that gap widening rather than closing.
The hidden cost of slower sales
Slower off-plan take-up is also feeding into the cost of building itself. Development finance is markedly more expensive than standard residential mortgages, and with sites taking longer to clear, builders are paying punitive interest rates for longer.
Hamptons calculates that additional finance costs added £3,125 to the build cost of every home last year, up from £2,934 in 2024. Roughly half of that increase is down to higher base rates.
“Many of the materials needed to build new homes are highly energy-intensive, meaning their costs have risen far faster than wider inflation,” Fell added.
According to the Home Builders Federation, the cost of building a new home has risen by £76,000 on average since 2020 — equivalent to 20 per cent of the total cost of an average UK home. The trade body attributes 40 per cent of that increase to government regulation and taxation, with the remainder split between material inflation and labour costs.
Industry calls for relief
Stacy Eden, partner and national head of real estate at financial consultancy RSM UK, said Whitehall must act to keep development viable. “With costs set to escalate further due to the economic impact of the Iran conflict, the real estate industry urgently needs further support from government to make housebuilding more viable,” she said.
For property investors, the data points to a market in transition rather than retreat. The exit of accidental and amateur landlords is opening up stock, particularly flats in regional cities, at price points that have not been achievable in years. Yields in the north and the Midlands are increasingly outpacing capital growth-led plays in the south, and developers anxious to clear sites are more open than they have been for some time on incentives, reservation discounts and bulk-deal pricing.
The off-plan window may have narrowed, but for well-capitalised investors with a long-term horizon, it has rarely been wider open.
