You’ve found the perfect house, and it’s part of a new development. Is buying a new build a good idea? Is an older property a better investment? Should you buy off-plan?
We’ll answer all these questions and more in this Complete Guide to Buying a New Build Home.
What is a New Build Property?
A new build property is brand new and has never been lived in. New builds are typically part of a housing development that includes multiple properties.
A recently renovated or refurbished property is not a new build. Nor is a property that was constructed in recent years but has previously been lived in.
Pros and Cons of Buying a New Build Home
A new build home will not be the right choice for everyone. Some people prefer character and history, and others fancy a refurbishment project. To decide whether this type of property is right for you, consider your circumstances and preferences, then weigh up the pros and cons:
- Low maintenance costs — it stands to reason that a brand new building will not require the same outlay in maintenance costs that an older property may.
- Input in the design — if you buy “off plan” (see below), you will be able to choose various aspects, including selecting certain fixtures and fittings.
- Move straight In — a new build offers the ultimate hassle-free, straightforward move. There’s no need to do any home improvements or decorating. Just move straight in!
- Deal sweeteners — some developers offer “extras” to encourage a sale. For example, they may cover the cost of some of the fixtures and fittings or offer to pay your stamp duty land tax.
- No property chain — buying from a developer means that there is no onward property chain. You will avoid the delays, stress and potential of a failed sale that chains can result in.
- Eco-friendly — new build properties are much more energy-efficient than older buildings, which means that you are doing your bit for the environment and saving hundreds of pounds on your electricity bills each year.
- Warranty — enjoy the peace of mind knowing that your home is protected by a building warranty, typically for the first 10 years after construction.
- Mortgage problems — getting a mortgage to buy a new build property can be more complicated than securing the financing for an older home. Lenders often cap the loan to value (LTV) at a rate of around 85%, which means you’ll need a 15% deposit.
- Lack of character — some people aren’t fond of the aesthetics of new builds, especially as they often form part of a development or estate filled with identical-looking homes. If you are seeking character, a new build home is not for you.
- Complex legalities — the conveyancing process for new builds is often more complicated than it is for anyone buying an older property. You may also be put under pressure by the developer’s solicitor to complete by a specific date.
- Delays — if you buy off-plan, there is always the potential for delays, which could cause problems if you have an eager buyer itching to move into your current home. Delays can also add to your costs. For example, if you are renting temporarily while you wait to move, you could have many more months of rent to pay than you had planned.
What is the “New Build Premium”?
The “new build premium” refers to the price lift that people pay for the privilege of buying a home that no one has ever lived in before. A new build house can cost tens of thousands of pounds more than a similar property of an older age.
According to recent research, the new build premium is currently 29%. However, the price difference between a new home and the rest of the market varies between geographical regions in the UK.
Is a New Build Property a Good Investment?
As soon as you move into a property, it is no longer classed as a new build. Thus, the new build premium is no longer applicable. Much like buying a brand new car, as soon as you drive it away from the showroom, it begins to depreciate.
So if you plan to buy a new build home and sell it very soon after, you are likely to lose rather than make money. However, if you buy a property to live in as your home for several years and then sell it, there is every chance that it will prove a good investment. The housing market is impossible to predict, but house prices generally rise over time, and if you have a mortgage, you will accumulate equity throughout your period of ownership.
To ensure that you’re making a good investment, choose a reputable developer with experience and plenty of positive customer testimonials. Pay particular attention to comments about the quality of their work and customer service. It’s a good idea to ask for a “snagging inspection” to ensure that the property is up to standard before you complete the sale. Finally, if the new build you want to buy is unlikely to be your forever home, choose the location wisely — is the property in an up and coming area or one where demand is low?
What Does Buying Off-Plan Mean?
Buying off-plan means committing to a purchase before your new home has been built. This may seem like a risk, but you can bag a bargain buying this way. You may also get the chance to have a say in how your new home is designed and built.
However, this can be a lengthy process. There could be a year or more between when you put down your reservation fee and when your home is ready to move into. This can be problematic for buyers who need to secure financing to buy as mortgages are typically only valid for six months.
How to Finance the Purchase of a New Build Home
Some help-to-buy schemes are only available for new build properties. The Help to Buy equity loan and the London Help to Buy schemes have been created by the government to help people get on to the property ladder by purchasing a new home.
Getting a mortgage for a new build home may be trickier than when buying an older property, but it’s certainly not impossible. Save as much of a deposit as you can to give you the best chance of securing the finance you need.
If demand for your preferred development is high, it’s worth considering companies that advertise themselves as cash house buyers. These quick house sale companies can buy your current home for cash in as little as seven days. You may have to move into rented accommodation while you wait for your new home to be ready, but as a chain-free cash buyer, you’ll be top of the developer’s wish list when it comes to cherry-picking who to sell to.
Is Buying a New Build Home a Good Idea?
Only you can decide! There is no one-size-fits-all when it comes to buying a house. It’s a big investment, so do your research and weigh up the pros and cons to explore the best option for you.
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