Is buying a new build a good investment?
A new build is a property available to purchase from new, usually from the property developer. Most new-builds in the UK can be found in the outskirts of the cities, around commuter belts and in favourable locations undergoing regeneration, which is often a strong indicator that property prices will increase.
Compared to existing housing stock, new builds are generally considered hassle-free and come move-in-ready, allowing homeowners to settle in quicker without having to make improvements or undertake repairs. At the same time, they tend to hold their value and can deliver attractive returns for investors.
We dive into what makes buying a new build a good investment, and some of the key aspects property investors should consider.
Are New Builds Overpriced?
You may wonder if you’re likely to pay more for a new build property. The answer is, possibly. New homes are generally priced to the maximum the market will allow, and, on average, come with a premium of around £5,000 to £8,000 compared to an older house – this is usually due to the advantages new build homes offer over older houses, such as lower running costs.
So is buying a new build a good investment? The good news is that new builds generally tend to appreciate in value slightly faster than older homes. If you compare new build prices with existing stock in the past decade, between 2009 and 2019, UK new build prices rose by 46.9%, compared to 41.5% with existing stock – a difference of 5.4% – and regional variations can mean this figure gets even higher. Although investors will pay a premium for a new build, they make a great brick-and-mortar investment when it comes to holding and increasing their value.
Another factor making new builds an attractive investment is the UK Government’s Help-to-Buy scheme, which allows first-time buyers to purchase a brand new property for just 5% deposit, with an additional Government-backed loan of up 40%, interest-free for five years. This means that it’s much easier for first-time buyers to get on the property ladder without having to wait years to save up a big enough deposit.
Are New Builds Worth Buying?
Purchasing a new build comes with many advantages. Here are some of the benefits that make buying a new build a good investment.
Usually when buying a property, the sellers and buyers are linked together in a chain because each sale requires the purchase of another property. As new builds deal directly with the developer as opposed to a private seller, the likelihood of the sale falling through due to the chain being interrupted is reduced, making them lower risk and easier to buy.
More Economical to Run
New builds tend to come with top energy efficiency ratings. Not only is this an attractive factor when it comes to reselling the property, it also makes them cheaper and greener to run which can save homeowners on energy bills. Additionally, as everything in the house is brand new, new builds typically come with lower repair costs and are less susceptible to problems thanks to the latest building practices and technology.
New Builds Come with a Warranty
The National House Building Council (NHBC) covers all newly constructed property with a 10-year warranty. In the first two years, this ensures the developer will take care of any defects and for years 3-10 you’ll have builder warranty that covers any issues you may have with the property.
Developers May Offer Incentives
While it can vary by region, it’s quite common for developers to offer incentives to make purchasing a new build more attractive. These can include paying Stamp Duty Tax, legal fees or covering part of your moving costs to make it easier to move into your new home.
As the owner of a new build is the first person to ever live in this property they’ll be able to customise its design to a certain extent – everything from the structure and layout to colour scheme and light fittings. This makes it easier to put a personal touch on the property as well as make it as attractive as possible to tenants if you’re looking at buy-to-let.
How do New Builds Compare to Old Houses?
Is buying a new build a good investment compared to an older house? When it comes to a new build vs an old house, there are some factors buyers may want to consider. A drawback for some buyers is that new build properties are said to have little character compared to older houses. If period property features such as high ceilings and ornate stonework are important to you, a new build may not be the right type of property. As well as their character, old builds tend to be more spacious compared to new builds, offering more generous square footage, garden and parking space.
Questions to Ask When Buying a New Build House
If you’re interested in buying a new build, there are a few things you should get clarified before proceeding. The first is to understand the incentives that the developer is offering with the new build, these can include covering legal fees and whether you are eligible for things like the Government’s Help-to-Buy scheme.
Understanding the construction timeline is also important. The timing for every new build will depend upon the developer. On average, it takes 3-6 months to purchase a new build, and sometimes the date you buy will affect how long construction takes. Potential investors in a new build should note that the end of development timeline can be a good time to secure a bargain. If there are only a few completed homes left for sale, many developers will be willing to negotiate as they will be eager to settle up and move onto the next project. Developers at the end of a project are more likely to be open to negotiation as reducing the price for a remaining property will not impact the sale price of the others (as they are already sold).
New Builds Worth Consideration
When investing in a new build, it’s important to look to where the market is strong and find an area that is up and coming, particularly if you wish to attract tenants. Here are some new build projects that property investors shouldn’t miss.
A new development in Leeds City Centre, Sky Garden in Leeds is located in the much sought-after Southbank. The development will include the full refurbishment of the Grade II Listed Midland Mills and the creation of an iconic residential tower. With house prices predicted to rise 28% by 2024, Leeds is tipped to be the number 1 city in the UK for capital growth, making a buy-to-let property an attractive prospect.
Located on Whitehall Road in Leeds, Springwell Gardens is 10 minutes by foot to the Southbank project, Leeds Train Station and city centre. Requiring a low deposit of 20% and with 15% discount on pre-launch prices, this is a good opportunity to secure a new build that has potential to appreciate in value.
So, is buying a new build a good investment? Overall we think yes. Government and developer incentives make them attainable, particularly for first-time buyers, and they offer a lot less hassle in terms of repairs and not being in a chain. New builds tend to be a good option as they retain their value without the risks that come with older properties and they’re often located in markets that are up and coming or likely to remain attractive. If you’re interested in learning more about purchasing a new build, contact our team today.