The benefits of buying a new-build property are plentiful, but on average it will set you back around 16% more than purchasing an existing, “second-hand” home.
The latest Land Registry figures showed that 16,355 new-build homes were sold in March this year, which is a 10% increase on the previous March – and a step in the right direction towards the government’s 300,000 a year housebuilding target.
However, according to LCPAca’s latest house price index for March, the cost of the average newly built home in England and Wales is now £338,694, which is 15.8% higher than existing properties, and some critics have put this down to the Help to Buy scheme on new-builds keeping the prices higher.
Price inflation variables
Annual house price inflation in the year to March 2018 according to the LCPAca figures was 3.4%, which is a slowdown on previous years and puts average property values in England and Wales at £290,624, including new-builds.
According to the data, this could imply that the higher selling prices of the new-builds being developed are actually going some way towards slowing down the housing market, as more people are priced out of buying them. Although there are targets for affordable housing levels, developers can avoid these under certain circumstances, and this could mean that not enough low-priced houses are being made available to buy.
However, one of the limitations of tracking new-build sale prices is that Land Registry data for such transactions tends to lag around six months behind, making it difficult to accurately measure the current state of the market.
How to get around the higher prices
One way that property investors are bypassing these premiums on new-build properties across the UK is by purchasing units off-plan, before they are built or even before any building work has begun. This means that buyers can get in at a lower price point and rely on the value increasing during the course of the build due to natural inflation, and enjoying a much higher final property value once the development is complete.
Furthermore, while the price of a new-build may be higher in some cases, the running costs of such properties tends to be significantly lower than existing homes as they are much more energy efficient, which is another thing to consider when weighing up the options. Maintenance and repair costs will also be minimal as everything is newly installed, and most come with new home warranty to cover any unexpected costs. For buy-to-let landlords, letting out a brand new property is a major selling point for tenants who want a hassle-free, high quality home.
