New build houses or flats can be attractive as no-one has lived there before, they’re a fresh and blank canvas, clean, and modern. But are they a good investment for buy-to-lets?
The government has committed to building a million new homes by 2020, and in the first quarter of 2019 there was a 31% increase in applications for new builds compared to the same period in 2018.
Are new builds worth the investment?
As with any investment in property for renting, you must ensure that your yields are high enough and ensure your running costs aren’t too large.
Bear in mind that with a new build, it’s possible some of the specifications may change during the build, and that the release of the keys is delayed if the house hasn’t been completed yet. It’s difficult to get a concrete date for completion of a new build, which has the knock on effect of not knowing when you can move tenants in and start being paid rent.
New builds can be suitable for many different types of tenants, from young professionals to families with children. This is partially due to their location; new estates are usually built in highly sought after areas, and those which are benefitting from regeneration. Some of the larger estates will have amenities built within them, such small supermarkets or transport links.
Sometimes, the earlier in the build process, the cheaper you can purchase a property. Some developers offer discounts of up to 5% for an early bird sale, but this can carry its own risks.
What about maintenance and running costs on new build homes?
New builds don’t need refurbishments as they are shiny and clean, though if you did want to paint the walls you’d need to use a breathable paint so that the timber in the walls and fresh plaster can thoroughly dry out. Check with the developer the terms for redecorating as sometimes you have to wait a year.
Even though they’re new, there’s often teething problems with these properties. Put together a snag list to send to the developer, there’s usually a timescale where you can get these fixed for free. Snag lists can include all sorts, such as wonky tiling in the bathroom or scratches on the doors.
Where are the hotspots in the UK?
If you’re thinking of investing in a new build to let out, you’ll want to know which areas in the UK have the best opportunities.
Manchester and Liverpool
Both Manchester and Liverpool are investing in building, with plans to develop 10,000 new homes in the city centres thanks to increases in young professionals and students.
The heart of the UK, London is top for buy-to-let investors (if you can afford the higher property costs). There are fantastic riverside locations and transport links in the Royal Docks, and Woolwich is experiencing plenty of local investment and also has good transport links.
Graduates from universities in Birmingham are staying put and finding jobs in the big city. This is aided by some well-known brands moving to the Midlands instead of London. There’s new developments going up on Kent Street in the city centre, and commuter belts which can provide brilliant investment opportunities for buy-to-let.