There seems to be a perennial problem with house prices in the UK – they are too high. The problem is one of supply and demand: there are just not enough homes to satisfy demand, so the prices creep ever upward.
In an attempt to mitigate the problem the government has pledged to build a million new homes over the next five years. They are also offering incentives. With a Help to Buy equity loan scheme you can buy a new home with a deposit of just 5%. And if you are a first time buyer aged between 23 and 40, the soon to be introduced Starter Homes Initiative will provide homes with a minimum 20% discount off market price.
So, should you buy a new build home? What are the pros and cons?
The process of buying a new build is a little different to buying an older property. This is because the building may not exist when you commit to buy. You are likely to be buying ‘off plan’. In other words, you will be buying a plot and the building on it by reference to a plan. You may have seen a show home but your home will not be exactly the same. This can lead to disappointment if the finished building does not match your expectations based on the representation of the show home and any brochures you have viewed.
On the plus side, if the building has not yet been constructed, you may be able to select fixtures and finishes at the build stage, allowing you to personalise your home from the outset.
Once you have decided to buy, you will probably need to arrange a mortgage. Again, because of the nature of new builds, mortgage companies can treat them differently. For instance, you may be restricted to borrowing a maximum of 85% of the value, meaning you could have to fund at least 15% yourself, unless you can take advantage of one of the government’s incentives.
A further problem is the fact that mortgage offers tend to be valid for six months. If you are buying off plan and your home has not been built in time your mortgage offer may expire, leaving you to negotiate a new offer that may be less advantageous.
Another new build consideration is size. In the 1970s homes were commonly built 12 to the acre. There was room for a garage and two cars on the drive. Ironically, now that average car ownership per household has roughly doubled, homes are being built 24 to the acre and you may only have space outside for one car.
Garden sizes are similarly smaller and the inside of homes has reduced also. Typically rooms are 20% smaller than their counterparts of 40 years ago.
Despite the reduction in size there is no denying the appeal of a new, out of the box, unsullied, shiny new home. It is a blank canvas waiting for you to stamp your personality upon it without the need to rip out half of the house to do so.
A new build also has the benefit of no upward chain. Whilst you may have to sell your existing property, at least you will not have to dangle from the thread of your seller having to coordinate their own purchase. Indeed the chain could be eliminated completely if the developer offers a sensible part exchange scheme. You could exchange your current property as part payment on the new home. Some developers offer below market value though, so you will need to balance the deficit against any costs saved (estate agent fees etc.) and the ease of the transaction.
Further benefits stem from the fact that the property is new. It will be built to the latest specifications in order to pass building control. As such, it should not need major repair for several years and will be more energy efficient, saving on utility bills. New build homes also come with a 10 year HNHBC warranty against structural defect and most developers will provide their own two year warranty. The downside is that not all defects show up on purchase. New buildings take a while to dry out and settle (a considerable amount of water is used in construction) and cracks and settlement issues can arise months later. Despite warranties some developers have been criticised for their after sales service so it is advisable to browse for reviews before committing to buy.
Finally, if your new home is one of the first to be built on the development you may find yourself living on a building site whilst the rest of the development is completed.