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. This scheme has been a great success in helping the new build market to remain buoyant, even during periods of economic downturn.
In addition, new builds are often more energy efficient than older properties, with the latest insulation, efficient heating systems and more. This makes them a great long-term investment for buyers who are looking for a cost-effective home but also for those who are interested in buy-to-let property investment. This is primarily because tenants prefer to live in new and more energy-efficient properties over older ones. Finally, new builds can come with generous warranties from developers, which cover the structure of the property and any appliances that come with it. This offers buyers extra peace of mind that their investment is in good hands.
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.
The process of buying a new build is generally simpler than buying a property from a private seller. 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.
This is especially beneficial for first-time buyers who are often at the bottom of the chain and therefore more likely to experience delays due to any link in the chain being broken.
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. You can be sure that you are getting a high-quality product that has been built to modern standards and regulations. 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 also come with a higher level of security than older properties, thanks to modern locks and smart home systems. These can be very useful in helping keep your home safe and secure. Furthermore, new builds are usually located in newly developed areas which tend to have better amenities and infrastructure, such as transport links, shops and restaurants. This makes them a great option for those looking for an easier lifestyle.
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.
In the unlikely event of an issue, you’ll be able to contact the NHBC and they’ll be able to help you find a resolution. The warranty is also transferrable when selling your property, so any new owners will have the same protection. It’s worth noting that the NHBC will only cover issues related to building work and materials, not appliances or furniture, so it’s important to keep that in mind when making any claims. Additionally, any existing issues with a property before the warranty came into effect won’t be covered either.
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.
With the right developer offering the right incentives, it’s possible to find yourself in your dream home sooner than you expected. That’s why it’s important to do some research into what developers in your region are offering before you commit to buying a new build property.
Incentives can also include extras such as furnishing packages, white goods and even appliances like TVs. It’s important to check the details of any incentives offered carefully to make sure you’re getting the best deal for your money. Additionally, it’s worth checking if any incentives are tied to a particular mortgage provider or lender, as this could limit your choice when it comes to finding the best mortgage deal.
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. The flexibility of customising a new build doesn’t stop there. Many developers now offer a range of options that can be chosen during the build process.
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. Additionally, these are all great ways to add value to your property and make it stand out from the rest.
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.
On the other hand, older houses may be cheaper to buy and can often come with features such as fireplaces and features that can’t be found in most new build properties. Older properties may also be located in more desirable areas than new builds. However, buyers should bear in mind that older homes may require some renovation work before they can be enjoyed.
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).
Also, it’s important to research the developer thoroughly before committing to any new build purchase. Make sure that their reputation is good and that they have a track record for delivering high-quality properties on time and on budget.
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.
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.