The share of new-build homes snapped up “off plan” before a single brick is laid has tumbled to its lowest level in more than a decade, in a fresh blow to the government’s ambition of delivering 1.5 million homes by the end of this parliament.

Research published by estate agency Hamptons reveals that just 33 per cent of new properties across England and Wales were sold prior to completion in 2025, down sharply from a peak of 49 per cent in 2016. The slide reflects a perfect storm battering the housebuilding sector, with buy-to-let landlords beating a retreat from the market, stubbornly high interest rates dampening buyer appetite, and construction costs continuing to spiral.

Off-plan sales have long served as the lifeblood of housebuilders’ cash flow, allowing developers to bank deposits and secure financing well before a project reaches completion. Their decline now threatens to push up the cost of capital across the industry at precisely the moment ministers are pressing for an acceleration in delivery.

The contraction has been driven, in large part, by the steady withdrawal of buy-to-let investors who have historically been voracious purchasers of off-plan stock, particularly flats in regeneration areas. The introduction of the 3 per cent second-home stamp duty surcharge in 2016 began the rot. That surcharge was hiked to 5 per cent at the end of 2024, and the Renters’ Rights Act, which came into force this month, has prompted a further wave of landlords to head for the exits rather than wrestle with rising costs and ever-tightening regulation.

First-time buyers, the other traditional mainstay of the off-plan market, are similarly hamstrung. Chain-free and typically flexible on timing, they have historically been natural candidates for purchases months ahead of completion. But higher borrowing costs, coupled with the closure of the government’s Help to Buy equity loan scheme in 2023, have squeezed many of them out of the picture entirely.

The pain is most acute in the flats sector, where investor and first-time buyer demand traditionally overlap. Just 22 per cent of new flats were sold off plan last year, a startling drop from 54 per cent in 2007.

Investors who remain in the game are increasingly looking north, where rental yields comfortably outstrip those available in the southern counties. In Oldham, Greater Manchester, an extraordinary 94 per cent of new flats were sold off plan last year, the highest share of any local authority in the country. London, by contrast, managed 65 per cent.

David Fell, lead analyst at Hamptons, warned that the structural shift away from high-density flats was creating fresh obstacles for ministers. “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.

Housebuilders, increasingly wary of carrying large blocks of flats on their balance sheets while they wait for buyers, are instead pivoting towards suburban housing schemes that sell more rapidly and limit exposure to rising financing costs. A Ministry of Housing assessment published at the end of March predicted the government would fall short of its 1.5 million target by some 400,000 homes.

The financial mathematics is becoming increasingly punishing for developers. Interest rates on construction loans are typically far higher than those attached to standard residential mortgages, meaning that every week a property sits unsold during the build phase adds materially to the cost base. Hamptons calculates that additional finance costs added £3,125 to the build cost per home last year, up from £2,934 in 2024. Roughly half of that increase, it 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 highly energy-intensive, meaning their costs have risen far faster than wider inflation,” Fell added.

Separate research from the Home Builders Federation underlines the scale of the squeeze. The trade body calculates that the cost of building a new home has risen by an average of £76,000 since 2020, equivalent to 20 per cent of the total cost of constructing the average UK home. Some 40 per cent of that increase, it says, is attributable to government regulations and taxes, with the balance accounted for by material inflation and labour costs.

The financial consultancy RSM UK is among those calling for ministers to act decisively to revive momentum, with a particular focus on planning reform, lighter regulation and lower taxes on new construction.

Stacy Eden, partner and national head of real estate at RSM UK, said the picture was set to deteriorate further without intervention. “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 warned.

For SME housebuilders in particular, who lack the deep balance sheets of the volume players, the squeeze on off-plan sales risks tipping marginal sites from viable to uneconomic, threatening both jobs and the government’s headline housing ambitions.

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Off-plan new home sales slump to 12-year low as landlords retreat and rates bite