Is Buying A New Build A Good Investment Post Lockdown?

Is now the time to sell your property fast and invest in a new build, even when we face economic uncertainty?

When we first wrote this article in 2020, it was during the Post Lockdown Mini Boom, which served the U.K. housing market well. It kept the market buoyant, coaxing new buyers out of the woodwork and preventing a sudden market crash.

This was great news for both businesses and homeowners alike as, in the meantime, it brought about what appeared to be a strong sellers' market.

House prices touched an "all-time high", according to the B.B.C., rising 3.8% in July 2020 compared to the same period in 2019. There was also a 66% increase in demand for new build homes since the market reopened in June 2020.

A release of pent-up demand created the Mini Boom; it enticed and motivated sellers to sell earlier than they usually would, which softened the impact of the pandemic on the economy.

Since then, however, the annual price change for a property from August 2021 to August 2022 increased by 13.6%.

Data from National Statistics suggests that the value of existing homes increased by 6%, and the importance of new-build homes increased by 23%.

But of course, there are signs that the housing market is slowing, with the first drop in monthly house prices, and now we are at the cusp of an economic crisis.

Is now a good time to invest in a new-build property? This article will discuss everything you need to know about new builds.

What Is A New Build Home?

Much like the name suggests, a new build property is a property available to purchase from new; in most cases, you buy a new build property through a developer. Bellway, Barratt Homes and Taylor Wimpey are some of the largest in the U.K.

To boost the number of new builds available and not fall short of its 300,000 new home target, the government granted new housing developers automatic planning permission (part of its 'Build, Build, Build' initiative).

As a homeowner, this means you now have a much wider pool of properties to choose from and that there's far more likely a new build on the market or under construction that suits you, especially if you're a picky property purchaser.

What Is The Process Of Buying A New Build Property?

When you buy a new-build property, it's similar to any other type of property except you are buying off a property developer and not an estate agent, auction house or private seller.

Most new build estates will have a show home to look around, giving you a general idea of the type of homes available.

Here is a quick version of the process of buying a new build property:

1. Instruct A Conveyancing Solicitor

When you buy a new-build home, you will need to select or instruct a solicitor to handle the conveyancing side of the property transaction.

They will take all things relating to the legal process, including talking to the H.M. Land Registry, but luckily since it's not an older home, it should minimise the risk of complex house transactions. You still will need to pay legal fees to your solicitor.

2. If Applicable - Sort Your Mortgage Offer

If you are buying with a mortgage, there are a couple of schemes to aid you, especially if you are a first-time buyer buying a new property:

a) The Help to Buy Equity Loan

This loan will allow you to get onto the property ladder, even if you can't save up enough for a large deposit. You will likely have to put down a 5% down payment, but the government will lend you around 15%-40% of the purchase price.

b) Shared Ownership Schemes

If you can't afford to buy a home outright, a shared ownership scheme will allow you to buy a portion of a home and pay rent to the remaining share.

3. Pay Your Deposit

Usually, a deposit on a new build will be between 10% and 30%, depending on the developers' offer; this is alongside an agreement to pay the remainder upon completion. The property developer will also want proof that the mortgage has been guaranteed.

4. Exchange The Contracts

As with every other way of buying and selling a house, the process becomes legally binding when you exchange contracts. Usually, you will have 28 days between putting down the down payment and exchanging.

Your solicitor will ensure that all the legal documents are accurate and that the developer has followed the correct protocol.

The NHBC or Premier Guarantee are new-build warranties that will protect your deposit after the exchange just in case something goes wrong with building development, as very often when you buy a new-build house, the purchasing agreement is buy off-plan — which means the building is still under construction.

The Pros Of New Builds Explained

Why is investing in a new build a good idea? To help you answer this and determine whether a new home would be right for you, we've outlined the pros of new builds below:

PRO: New Builds Are Very Energy Efficient

When weighing up the affordability of any home, energy consumption is one of the first factors you must consider. You can check a property's energy performance certificate (E.P.C.).

Choosing a new build with low energy consumption can be a significant advantage. Not only does it reduce your carbon footprint, but it also drags down your energy bills, giving you more financial flexibility. A win-win if you ask us.

Plus, some new builds are even equipped with solar panels, which can make you money by selling the energy you harvest back to the energy company, making it a win-win… win (if that's even a thing?)

Will this make a new build a good investment for the future?

"Yes, low energy consumption is always something to look for with any property and a valuable asset come sales time."

PRO: Typically, A New Build Is Low Maintenance

New builds should require low maintenance and cost far less in repairs. Being a new home, they're typically susceptible to far fewer problems and more reliable due to building practices and homebuilding technology advancements—for instance, triple-glazed windows and insulation.

Parts should also be cheaper and more readily available compared to older properties. Therefore by owning a new build, you hedge the significant cost associated with repairing wood apexes or intricate stonework that you'd more likely incur by owning a property that's period.

Does this make buying a new build a good investment?

"It does. Investing in a new build should also mean you get a ten-year NHBC certificate – a warranty that covers you against building defects or issues."

PRO: Buying A New Build Comes With Developer Incentives

As well as making savings when you move into a new build, you can also make savings through your initial purchase. Most developers will offer a variety of incentives to make you more likely to buy through them. For instance, Bellway will cover agent fees to sell your current house, and Barratt Homes will offer N.H.S. workers a 5% contribution towards a new build.

And while these are great, you can go one better in most cases. The savvy negotiators can even haggle for a lower asking price or upgraded (sometimes free) fixtures and fittings!

How should you go about negotiating when investing in a new build?

"Like with an existing property, you should be polite is always the best policy. You're far more likely to get a good deal!"

PRO: Buying A New Build Also Comes With Government Incentives Too

In many cases, the government will also offer support for those looking to buy a new build. The most popular support form is the Help To Buy scheme, which (provided you're eligible) allows you to buy a new home with just a 5% deposit. This means that first-time buyers can quickly hop onto the housing ladder instead of waiting years to save a big enough deposit. To put the scheme into perspective, you could get into a £300,000 new build for just £15,000!

Is there another way to invest in a new build?

"Shared Ownership could be another option if you want to acquire a new build with limited funds. Unlike Help To Buy, this scheme allows you to buy a proportion of your property and pay a small rent to your housing association for the rest."

PRO: A New Build Is Move-In-Ready

One of the biggest perks of new build properties is that they're what's known as move-in-ready – a snippet of property jargon that means a home is fully decorated. Moving-in-ready homes may be your option if you're not a fan of D.I.Y.

Move-in-ready homes have their advantages. Going down this route often allows you to settle into your new home far quicker than with a fixer-upper (a house that needs some work). It also means that instead of finding the time to decorate, footing all the costs and then doing it wrong, you can leave it to the professionals and have a home with a high-quality finish the first time around.

Is there more to a move-in-ready new build?

"There is indeed. Don't have the time for furniture shopping? No worries - you can often buy a new build fully furnished. That's another thing off your 'to-do' list" (tick)."

PRO: Buyers Of New Builds Can Design Their Home

Fancy becoming an interior designer for the day? Choose a fully furnished new build, and you could do just that.

You'll be pleased to know that developers understand the importance of interior design - the ingredient that ultimately turns your house into a home.

Opt for a new build, and you'll have a vast catalogue of options. The start is only the start: granite worktops, plush paint colours, vintage wallpapers, stainless appliances, recessed light fittings, fancy furniture, and ornate tiles. Rumour has it you can even equip a new build with an Aga range cooker. How contemporary is that?

But your design input can go even more profound. Depending on the house, you can also make some structural changes. Not a fan of interior walls? You can go open plan. Want a pair of bifold doors onto the garden instead of a generic window? You could specify just that too. Fancy using your loft space as a bedroom? Loft conversions may also be available.

Are there any specifics you'd recommend?

"The option we'd advise you to specify is an L.E.D. underflow for your kitchen cupboards. While it may appear an unnecessary gimmick at first, it is surprisingly useful. On those early mornings or late nights when you don't want to be blinded by the main light, it's a great alternative."

PRO: New Builds Are The End Of The Chain

Investing in a new build could be wise if you're fed up with the hassle of property chains or afraid of a chain break. Dealing directly with the developer instead of a private seller is a simple way to minimise your timescale, as it stops any upward chain.

Are there any other ways I can escape a chain?

"While buying a new build streamlines your purchase, for the quickest possible move, you need a speedy property sale too. Being a trusted cash buyer of property, we can cut out any chance of a lower chain and complete it in as little as seven days."

PRO: New Build Properties Appreciate

Do new builds increase in value? It seems so.

According to data released by property developer, StripeHomes, in June 2020, the price of new build properties increased by an astounding 7.3%, while for an existing home, this sat at just 1.5%. Since 2021, new-builds' cost has risen again by 23%, while older homes only increased by 6%. Pretty encouraging if you ask us.

Any top tips on how to keep the resale value of a new build-up?

"There are two main things we'd suggest. First is to be mindful when designing your interior. If you're looking to sell on within a couple of years, then stay away from garish colours and 'out there designs. Please keep it simple and minimalistic --- the more you think about future buyers when designing your home, the less ammunition they have to cut you down on your asking price."

"Second is investing in a strong market and identifying an upcoming area. In the study above, London was the top performing region, hardly surprising, but proof that location matters when it comes to appreciation."

PRO: Leasehold VS Freehold - Leasehold New Builds Are No longer A Thing

Contrary to popular belief, all new build houses are now sold as freehold properties. Before June 2019, new builds were sold as leaseholds, which led to many buyers being faced with catastrophic ground rents doubling by the year and ridiculous charges if they decided to purchase their property's freehold. In some cases, owners even had to pay their freeholders if they wished to change their house repayments.

Any advice on tenure?

"The Leasehold VS Freehold debate can be tricky to understand, we have a guide on tenure for more detail."

The Cons Of New Builds Explained

Although a new build property may seem like the way to go as the buying process may be much simpler and faster than an older property, there are a few cons to buying a new build.

CON: New Builds Are No Character Property

It's no secret that new builds are worlds away from a period property, so for avid fans of high ceilings and ornate stonework, their minimalist modern design may make them a no-go.

What's our advice to buyers?

"We completely understand why fans of character properties would quickly recoil at the sight of a new build. However, it's well worth seeing a new build in the flesh for those on the fence before reaching any conclusions. While there's no hiding that a new build is anything but period, it doesn't mean to say you can't design it using a period style. Like adding ornate stonework and cornicing, which could be specified through your developer."

CON: Developers Are Picky With Part Exchanges

While new-build part exchange schemes could be a good option, they can be limiting. Each developer has a set list of requirements for part exchanging your house, many of which could mean something other than this is a viable option for you. Here are just a few of these catches to look out for:

• You must own your own home.

• Your property must be worth less than the new build you want.

• Homes of nonstandard construction may be rejected.

• The location of your property will make or break your eligibility.

Does this mean a new build could be a better investment? Is there a way around it?

"Thankfully, there is indeed a way around this. While developers are picky and sell a house, fast companies like ourselves are anything but. For instance, we'll buy any property, condition, or location. Plus, we would likely get you a better deal than what you're being offered through a developer."

"Also, it's worth remembering that if you're part exchanging your house with a developer and you back out of your purchase, you'll likely lose the part ex deal as well - a double blow! Whereas, if you were to sell your house fast with us and pull out of a purchase, we'd remain your buyer. Want to put us to the test?"

CON: Some Newbuilds Have A Reputation For Snags

This is not so much a con with new builds but more just something to watch out for. As you can expect, with new build communities expanding rapidly to meet government targets, slight issues with quality and fitment can occur. Common complaints include the height of the carpet preventing doors from closing, and that garden fences need to be more relatively straight. But this should be fine if you do your homework and choose a reliable developer.

Is buying a new build a good investment if there are quality issues? How do we get around this?

"The easiest way to get issues like this sorted is to get yourself a snagging survey."

Top Tips For Buying A New Build Property

We have spoken about the pros and cons of buying new builds; the next step is purchasing the property; here are some top tips for buying a new property:

1. Research The Developers

Even if you are buying the property with a mortgage, you will still be spending money on a new-build home, so it’s crucial that you research the developers.

It would help if you looked at their website and case studies for past developments and then at their TrustPilot or Google reviews for disgruntled past customers.

If you need clarification on the developers, go to house viewings or open days of their showrooms and inspect the properties & see how friendly the staff are.

2. Schedule Delays

When you buy a new property, you will probably be purchasing it before it is built, which has problems as there may be delays in the construction.

This will have a knock-on effect and create issues with your mortgage offers, usually valid for six months. If the building is delayed longer than six months, you must reapply for your mortgage offer.

When you agree to a new build, you should insist that the developer honours an extended stop completion date — setting a target date for completion, which, if the developer misses, will allow you to claim compensation.

3. Snag Away

Once your new home has been constructed, you need to ensure you are happy with it; the developer will allow a period of snag time.

This is where they will rectify any problems for no extra charge.

When you first look around your property, you should look for any defects in the paintwork, woodwork, tiling, windows, walls, ceilings, plastering, kitchen counters, doors, brickwork, roof tiles and gutters.

You should also check all taps and showers to ensure that the water pressure and temperature are correct and that all the electrics are in working order.

For a fee, you can request a professional snagging survey undertaken by a third party for extra reassurance.

4. Future Proof

When you buy a new-build property, it may decrease in value for the first few years you live there.

It’s essential to think of the long game in mind and have the time and energy to add extra value to the property over the years.

One of the best ways to add value to a property is to add square footage, which you could do via a kitchen extension, loft conversion or conservatory.

Alternatively, you may want to create a decked area in your garden or an outhouse art studio…it’s really up to you!

Why Should You Buy A New Build Home?

As suggested before, if you're buying a new build, one of the significant benefits is that the repair and maintenance costs shouldn't be a problem. The new build should be energy efficient and have a 10-year warranty to cover you if anything fails. This can be a massive motivator to choose a new build over an older property that needs much tender loving care.

Is Buying A New Build A Good Investment?

In a world where the property market's future remains uncertain, buying a new build is a good investment and makes a lot of sense.

Government and developer schemes make them easily attainable; the majority are well located (a bonus for commuters), they cut the hassle of D.I.Y. and are likely to cost you far less in outgoings.

Ask us, and in the event of a market crash, the new build market will likely remain the strongest.

Why? Because new builds are the 'safe' option, they're the family cars of the property world.

Reliable, cheap to run, and in essence, they do precisely the same job as other more flamboyant alternatives - i.e. period and character properties. Kind of a kooky analogy, but one that highlights just how beneficial new builds could be during challenging economic times.

So, is buying a new build a sound investment post-lockdown? Yes, in theory. However, whether a new build is right for you entirely depends on your circumstances.

If, and only if, you can comfortably afford to upgrade to a new build, would we suggest you do so. The last thing you want to be financially strapped before a recession.

Although, if you answered 'No' to the above because you haven't yet sold your house, we could help.

In case you haven't already worked out, we're a cash buyer of a property specialising in purchasing homes across England and Wales.

With over 50 years of combined experience in cash property purchases, we're a 'Sell house fast company that you can trust. But don't just take our word for it. Give us a ring today to get your no-obligation cash offer.