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Investing in a new-build could be “safest path” through turbulence

More than ever, new-build homes represent a superior offering compared with older properties, and they could hold their value better through tough times.

The strength of the new-build sector has been demonstrated in a new report released by Alliance Fund, which has found that the price gap between newly built homes and existing properties has widened over the past 10 years, alongside a ramping up in the pace of new homes being constructed.

The data shows that today’s new-builds are priced at an average of 37.3% higher than existing homes, compared with a 21.2% house price gap a decade ago. Overall, the average price of a new-build has risen by 47% over the past 10 years, says Alliance Fund, which outpaces the rate of price increases seen across other parts of the market.

According to Iain Crawford, CEO of Alliance Fund, although this of course can make it more difficult for some buyers to purchase a newly built property, it also “demonstrates the superior offering of the new-build sector versus existing market stock”.

In the past year alone, the research found that the price premium commanded by new-builds above older properties has increased by 11.6%. This is while house prices across the board have been on the rise post-Covid, with buyer appetite still going strong.

The benefits of buying a new-build

As Crawford points out, for those who are able to pay more, there is a huge range of advantages that come with investing in a brand-new property – whether to live in or as an investment home for buy-to-let and for the future.

“Of course, a new-build home presents many advantages that an existing home does not, such as a smoother sale and no onward chain to consider, greater energy efficiency which has never been more important in the current climate and the additional benefit of incentives offered by many developers such as the removal of stamp duty on the purchase.”

So is now a good time to invest in a new-build, despite the additional initial cost? Crawford believes so.

“With many now predicting an end to the pandemic property market boom, a new-build purchase is probably the safest path when looking to negate any downturn in property values over the coming months, as they also hold their value to a far greater extent.”

Over time, older, more dated buildings inevitably need more maintenance, upkeep and even major renovation to keep them comfortable and habitable. With the cost of living crisis raging on, and escalating building material costs and labour shortages, this can be particularly off-putting for investors.

While new-builds of course come at a premium, as such, they also come with a certain level of financial certainty for the buyer, in the knowledge that there will be no major unexpected costs for the property round the corner.

How to invest and save money

For buyers and investors who are keen on new-builds but want to mitigate some of the price premium involved, investing off-plan can be the ideal choice. This involves buying a property before or during construction.

One major benefit of this purchase method is that you normally secure the property at a much cheaper price than its final market value; and a lot of the time, the property has already increased in value by the time it has been completed, for those who wish to sell.

Before buying off-plan, it is important for investors to do their own research into the project, the developer and the property investment consultancy, if you are using one, to ensure you are happy with who you are working with. It can be an incredibly lucrative way of investing in a premium property without the price tag.

For those who plan on letting out their property once it has been built, the fact that it is a new-build is also a huge selling point to tenants – particularly when focusing on the money that can be saved on annual energy bills compared with an older property.

BuyAssociation is a property investment consultancy specialising in sourcing off-plan, new-build properties for investors, as well as newly renovated existing homes. Get in touch today for more information.

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