Tuesday 25 July 2017 11.22am
Not really that simple.
Another way of putting what you've just said is: "The current model that developers are allowed to operate means that they can offload the risk to purchasers or speculators at a very early stage in the development - sometimes before the ground has even been broken"
No, that's not the same thing at all - pre-sales do de-risk the development to some degree, but, as John said, the main reason is to prove demand and satisfy financing conditions. Lenders often won't commit to financing unless they can comfortably underwrite their exit position, and pre-sales provide proof of demand/value, hard cash deposits, and contractual liabilities from purchasers to complete on the sale once the development is finished. And most of these big developments finance 60%+ of total costs, so it's a very important part of the process.
Interestingly, lenders would MUCH prefer to have UK individuals as the pre-sale buyers, as contractual claims are far easier to pursue against someone who is UK-based rather than somewhere like Shanghai or Doha, but unfortunately the demand just isn't there (partially due to the reasons John mentioned above as well).