Decline in New Build Home Sales: A Closer Look at the Trends

The housing market is a dynamic landscape, constantly influenced by economic factors, buyer preferences, and government policies. Recent research by TwentyCi has unveiled a significant shift in the market for new build homes, revealing a 21% drop in sales agreed for these properties compared to 2019. This decline, with sales plummeting from 33,666 in 2019 to just 26,724, raises questions about the underlying causes and implications for the housing sector.

Resale Properties on the Rise

In stark contrast to the new build market, the resale property sector has experienced a 6% increase in sales over the same period. With 842,371 sales agreed in 2023 compared to 795,050 in 2019, it appears that buyers are gravitating towards existing homes rather than newly constructed ones. This trend suggests a shift in buyer sentiment and priorities, prompting a closer examination of what drives these decisions.

Supply vs. Demand: The Real Issue

One of the most intriguing findings from the TwentyCi report is that the decline in new build sales is not due to a lack of supply. In fact, the volume of new build instructions in the market has surged by an impressive 65% over the past year. This increase in supply indicates that developers are keen to meet demand; however, the market response has been tepid. The research suggests that the price premium associated with new builds is a significant factor behind the reduced demand.

The Price Premium Dilemma

According to TwentyCi, homebuyers are now expected to pay an average of 17% more for new build properties compared to their resale counterparts. This translates to a staggering difference in average asking prices: £497,939 for a new build versus £425,130 for an existing property. The £72,800 premium for a brand new home is substantial and could instead be allocated towards enhancing the value of a resale property through renovations or improvements.

This price disparity raises critical questions about the perceived value of new builds. As buyers weigh their options, the allure of a brand-new home may be overshadowed by the potential for greater value in existing properties, particularly when considering the costs associated with new builds.

Impact of Economic Factors

The current economic climate has also played a pivotal role in shaping buyer behavior. Rising interest rates have significantly impacted affordability, making it more challenging for potential homeowners to commit to higher-priced new builds. Additionally, the removal of government schemes such as Help to Buy has further constrained buyers’ purchasing power. These factors have led to a fundamental shift in how new builds are assessed by buyers today compared to five years ago.

Future Considerations: Stamp Duty Changes

Looking ahead, the housing market may experience further changes with the upcoming reversion of Stamp Duty rates. Starting from April 1, 2025, the 0% threshold for first-time buyers will revert to £300,000, down from the current £425,000. This shift could potentially influence developers to reconsider their pricing strategies and incentivize first-time buyers to consider new builds once again.

As the market adapts to these changes, it will be crucial for developers to understand buyer sentiment and adjust their offerings accordingly. The question remains: will they choose to lower prices or offer incentives to attract buyers in a competitive landscape?

Conclusion

The decline in new build home sales, juxtaposed with the rise in resale property transactions, highlights a significant shift in the housing market. While supply is not an issue, the price premium associated with new builds, coupled with economic pressures and changing buyer preferences, has led to a reevaluation of what homebuyers are willing to invest in. As the market continues to evolve, both developers and buyers will need to navigate these complexities to find a balance that meets their needs and expectations. The coming years will be pivotal in determining the future trajectory of new build sales and the overall health of the housing market.