In the first quarter of 2021, 50,000 new builds were completed in the UK, the highest number for the past two decades. While new builds and new build developments present many positives – from a completely blank canvas to incentives from the developer to being chain free, one of the most common drawbacks you’ll hear is that they lose value.
In this article, we take a look at the benefits of new builds and whether buying new build properties is a good investment or a home that is likely to lose value.
Should I Consider Buying a New Home?
There are a number of reasons why new builds are appealing to buyers:
Blank canvas: You’ll be the first to live in the new build, so there won’t be much renovating to do. You can simply move in and unpack. At the same time repair costs should be minimal for the first few years of living in your new build.
Modern Design – New builds are created to the latest environmental and efficiency standards. 80% of new buildings have the highest A or B ratings compared to 2.2% of existing properties, which means lower bills. At the same time, a combination of open-plan layouts, the latest technology and other conveniences of modern design add to their appeal.
Support Schemes – The UK government has schemes like Help-to-Buy and Shared Ownership to help first-time buyers get onto the property ladder with a new build home. Developers will often add extras in order to make a sale, such as covering the cost of the stamp duty when it applies, letting you choose fixtures and fittings or covering the costs of certain things inside the home.
Chain Free – As you are the first owner of the property, there is no chain of buyers that can cause delays, reducing stress and making it easier to move into your new build.
Is Buying a New Build a Good Investment?
Just like driving a new car out of the showroom, it is likely your new build will depreciate in value the minute you get the keys. This is because the moment it is no longer brand new – one of the main selling points – it loses value.
If you are thinking of buying a new build property, it’s good to do so with the intention of living there for a few years before you sell. However, this doesn’t mean that there aren’t ways to add value to your property.
What Increases the Value of a New House?
When you purchase new build homes, it’s good to keep in mind ways you can add value in the future. This could be adding additional space with a conservatory or converting the attic.
While you may not be able to afford those improvements straight away, they can help you make the property more attractive to buyers down the line.
Do you Pay Stamp Duty on a New Build?
Stamp Duty applies to all property purchases and the rate will vary depending on the price of your property.
In regards to new builds, if you are a first-time buyer, you won’t have to pay stamp duty on the first £300,000 of your home. For homes valued at £300,001 – £500,000, the stamp duty rate will be 5% of the purchase price.
Can you Negotiate the Price of a New Build?
Developers are often quite open to negotiating on the purchase price of a new build property. You may have more luck getting a discount if there are just a few houses remaining to be sold or it is close to the end of the financial year. You can find out what other properties on the site were sold for via the Land Registry.
If possible, look around for deals. If a developer cannot offer a discount on the price, they may add other incentives like paying for stamp duty or legal fees that may apply, covering costs like carpets or letting you choose certain design elements like fixtures, fittings and layout.
New builds remain popular due to their completely blank canvas and the range of incentives for first-time buyers looking to get onto the property market. Do new builds lose value? The answer is initially most likely, but that doesn’t mean the property won’t rise in price or that you can’t find ways to increase the value of the property.
Is Help-to-Buy Only for New Builds?
The Help-to-Buy scheme enables first-time buyers to put down just a 5% deposit for new build homes only. First-time buyers may have limited equity and the scheme is created to help those that may struggle to come up with the necessary deposit for a mortgage.
For How Long can you Reserve a New Build?
When you’ve found a new build development and property you’re interested in purchasing, the next step in the buying a new build process is to put down a reservation fee to hold the property. Once the sale goes through you get the reservation fee back, or have it deducted from the purchase cost. Usually the new build is reserved for 28 days in order to allow for the exchange of contracts and other legal processes to take place.