We understand the attraction of a brand new home. In fact, one of the Waymark team bought one last year. There were many options to choose from including kitchens, sanitary ware, wardrobes, wall tiles and floor coverings. The list of extras can be extensive as can be the list of other incentives being offered with a new home.
Across the various new homes developments in the local area we have seen offers of stamp duty being paid, legal fees covered, part-exchanging your home, luxury kitchen upgrades, Samsung televisions, Dyson vacuum cleaners, and vouchers for John Lewis! With all this available it is easy to see how some people find it hard to resist a new home. And, if your new home is to be the only property you own, you can also benefit from getting 20% of the house deposit, interest-free for five years, as part of the government's Help to Buy scheme!
You also have the added assurance that new houses usually come with some sort of homeowners guarantee - National House-Building Council (NHBC), Local Authority Building Control Warranty (LABC) and Premier Guarantee. These operate under the Consumer Code for Home Builders. So one of the advantages of a new home is that if there are any issues or ‘snags’, the builder is required to rectify them.
Having done a quick search across all property types and prices ranges on Rightmove, in Faringdon, 34.16% of properties for sale are new. If you do the same search for properties in Shrivenham, 52.63% of the available stock are new homes.*
On paper, you would have to say that a new home is full of promise; full of shiny new extras and available without having to find the full deposit. But, is this a short-term view of what is actually a long-term commitment?
To start to answer that question, it helps to understand a bit about how New Home developments work. As mentioned, the list of extras included seems endless but as the saying goes, “there is no such thing as a free lunch.” The cost of these extras is worked into the asking price of the property. As a buyer, you are paying for all these “free” items. The typical new home is around 5% to 10% more than its equivalent secondhand counterpart. If you are paying £400,000 for a new home, conceivably, £20,000 to £40,000 is then available for the various incentives to sweeten the deal!,
Looking at the overall financial position, on balance, paying slightly over the secondhand value can and often does have a range of benefits, but the idea that all the extras are being given “free” by the builders is a false one. Accept that you are paying extra for them and you will then get a truer view of the underlying value of the home you have just bought.
This aspect is important to consider given how property prices are currently performing. The Nationwide House Price Index shows a national year to date property price rise of 2.5%, which, whilst is not huge, is at least in the right direction. However, remember that we said that new homes are typically 5% to 10% more expensive than their second-hand equivalent?
So, by way of illustration, if we assume our £400,000 purchase completed this month, its second-hand value (remember when you sell you’re no longer a ‘new home’), has immediately dropped. That isn’t in itself an issue if you have no plans to move for a while but it is important to understand that under the current house price growth, it could be a number of years before its secondhand value reaches the price you paid.
We have been used to property having a double-figure annual percentage increase so previously the loss incurred when buying a new house has been masked by the natural inflation of the property. In a slower market, where the increases are marginal, the time to recover the new home premium takes considerably longer.
This is not Waymark saying do not buy a new home. It is us saying, know what you are buying and know what you are getting into and make sure that you limit the gap between what you pay and what it worth the day after moving in.
That said, if we have made you think about your next home, we do have a great range of sensibly priced resales for you to look at.
* Property search carried out on Friday 3 August 2018
Other Buying Posts
- Buying a New Home
- Let Waymark Find You The Perfect Doer Upper
- What is Gazumping?
- 7 Ways Buyers Can Help Themselves Secure Their Next Home
- Top Indicators For Knowing When It Is The Right Time To Move
- What to Consider When Downsizing
- Help To Buy - What are the Numbers and Is It Helping?