Buyers turn to off-plan as supply shortage worsens

UK homebuyers are turning to the new build market and buying properties off-plan as a result of the chronic lack of supply in the resale market. With London experiencing the most pronounced shortage and the fastest rate of house price growth in the country, many view buying off-plan as the only way to get a property in the capital.

While overseas investors are also returning to this market, following a period that saw them exert increased caution because of falling house prices and unfavourable mortgage terms, recent research shows that 60% of off-plan buyers in London are now owner-occupiers.

Off-plan means buying a property based on drawings alone, before any building work has started and, in some cases, before any land has been acquired by the developer. Typically favoured by young and risk-friendly investors with access to reasonable amounts of capital, buying off-plan can produce large returns in a short period of time.

Outside of London the housing shortage in city centres such as Birmingham, Manchester and Liverpool the housing shortage is resulting in an increase in sales of part-completed schemes, where construction has started and a show home is available.

Stuart Law, Chief Executive of Assetz, said:

“We first witnessed a renewed interest in off-plan 12 months ago, with demand levels in London now beginning to push prices up for this type of property.

“Off-plan holds many benefits for buyers - there is no immediate need to have a mortgage in place and stamp duty costs are not paid until completion. For investors looking to make good returns I would recommend that they carefully research the area in which they are buying and consider using specialists such as Assetz for Investors to minimise the risks associated with any investment.

“It is unlikely that off-plan will return in any significant volume outside of London for some time. However, the increase of part-completed purchases in city centres is likely to become increasingly popular as the year progresses.”