Delivering more homes has been high on the government’s agenda since new targets were announced in 2017’s Budget, opening up more options for those looking to buy a new-build.
As residential construction continues to step up across the UK, increasing the number of new-builds available, those seeking to invest in new property will be faced with a wider range of choices when deciding between a new-build or an existing property.
There are of course pros and cons to each option, and much will depend on the particular development you are looking at.
The benefits of investing in a new-build
- No chain – When buying an existing property, there is often a chain above you, which can add stress as well as slow things down if people higher up the chain pull out, whereas this isn’t the case with new-builds. Buying a new property also removes the risk of being gazumped.
- Discounts – Developers will sometimes offer money-off incentives enabling larger savings than when buying privately, particularly when a building project is in its early stages.
- Peace of mind – New-build homes come with an NHBC (or equivalent) 10-year warranty, which includes a two-year builder warranty followed by an eight-year insurance agreement against damage to your home caused by building errors that affect the main structure.
- Everything brand new – It goes without saying that when buying a new-build, all the fixtures, fittings and decor will be brand new, modern and unused, with most new appliances coming with their own warranties. Developers often install the latest smart technology as a selling point, too, with the most up-to-date energy efficiency and ventilation technologies.
- Cheaper and greener – New-builds are substantially cheaper to run than the majority of existing properties, which offsets some of the premium paid at the outset over time. They are built to the latest environmental standards, with better insulation, more efficient heating systems and, as mentioned above, better appliances. According to the Home Builders Federation, more than 80% of new-builds have an A or B energy performance rating, while only 2.2% of older homes have the same.
- Customise – If you invest before or during the building phase (off-plan), you will probably have the opportunity to choose things like the decor and even the appliances and layouts yourself.
- Help to Buy – The government’s Help to Buy scheme is only available on new-builds, and has helped thousands of first-time buyers onto the housing ladder.
- Great for tenants – Compared to older, tired rental properties, new-builds are much more appealing to tenants because they won’t have to worry about issues like damp, condensation or unreliable old boilers and heating systems that sometimes plague older rental properties. The fact that bills are much lower is an added bonus for tenants.
- Less hassle for landlords – Property investors often have to deal with repairs and maintenance on their rental properties, but much of this is taken away with a new-build as the chance of appliances wearing out is significantly lower.
- Compromise – If a brand new building isn’t for you, investing in a newly redeveloped existing building or conversion can be a good compromise. Everything internally is still brand new, often with optimised insulation and other mod cons to improve energy efficiency, but this option can offer more character than a new-build.
Things to be aware of
- Freehold or leasehold – The government has confirmed plans to abolish the selling of new houses as leasehold properties after the ground rent scandal, but most apartments and flats (including both new and existing) are still often owned as leasehold, which normally causes no issues for the owner provided you are aware of the terms.
- Higher initial cost – New-builds often come at a slight premium to local market value, although this can be offset if investing before the build begins (off-plan), and by factoring in the benefits including more efficient appliances, cheaper utilities and lower maintenance costs. When buying a new-build, it is better to look at the long-term outcome.
- Delays – Sometimes construction schedules don’t go to plan, and things can run over the predicted completion date. Your developer or agent should keep you informed throughout the process, enabling you to secure a mortgage at the right time and be prepared for the final move in date.
- Snagging list – Even the highest quality new-builds may have small issues, or snags, that need to be sorted out. A snagging survey should be done early on so that you can get professional advice, and snagging issues should all be sorted by the builder.
BuyAssociation offers a huge range of both new-build and conversion developments to suit every investor. Browse our investments page or sign up for free membership for more information.