Future Value Of New Build

ACX

Hi everyone,
I am a first time buyer and would like opinions on the likely change in value of new builds in the future. My partner and I have found a house that we really like on a new development. It is up for 200k but we have been offered 192k with stamp duty and carpets thrown in. This is a response to our first offer so i'd imagine that there is further room for negotiation. The concern is, I have looked at house prices for similar houses in the area and the average for a comparable older house is 175k. There is a development nearby that was completed in about 2006, and according to Zoopla, the highest price they sold for was 205k in 2007, and some went for 180k in 2008 and they are 4 bedrooms rather than the 3 we are looking at. As this is our first purchase, we do not want to be stuck with a house that we can't sell without taking a loss in the future. Are new builds like new cars, does the added value of it's modern design and features decrease over time? We would be looking to stay there for about 5 years? The other thing that adds value from our point of view is that they offer a deal, whereby they give us a 25% loan towards our deposit. This is interest free for 10 years and can be repaid at the current market value, so if we sell the house for less, they get 25% of that. This means that we can have a much nicer house for the same cost to ourselves, and we get access to better mortgage rates as we also have savings to add to that. The particular house we are interested in was planned as a 4 bed, with a master bedroom in the loft space, their show house has this set up and is on for 250k. This could add value in the future as there is the possibility of converting the loft space ourselves, however this is going to be a 3 bed purely because the 4 beds they have already built have been hard to shift. The house itself is built and they are working on the internal features with a view to finish in March. Do buyers of new builds often make a loss? They have sold all the 3 bedroom houses in the first 2 phases and there are 3 more to build, so if the houses are worth that now, in an improving market and when it is no longer on a building site it would seem logical the value would improve, wouldn't it? I'm sold on the house and it would be perfect for now, but I don't want to regret it later. Any thoughts would be appreciated, thanks for reading.

Cissi

ACX wrote: »

They have sold all the 3 bedroom houses in the first 2 phases and there are 3 more to build, so if the houses are worth that now, in an improving market and when it is no longer on a building site it would seem logical the value would improve, wouldn't it? I'm sold on the house and it would be perfect for now, but I don't want to regret it later. Any thoughts would be appreciated, thanks for reading.

Well, that's the £100k question isn't it - is it really going to to be a sustainably improving market? I doubt anyone knows this for sure.
Personally I wouldn't touch it - still too many risks, even if the actual house is built. But you say that you're sold on the house and it's your decision...

ACX

I realise that no one has a crystal ball to see into the future, but I thought there would be accepted trends/pitfalls regarding the value when it comes to new builds. One thing that I have noticed is that although we were told that the first phase was completed last February, I cannot find any information on the price they sold for, not even on the land registry. I have the postcode, but even if I use the royal mail postcode checker, these properties do not show up. Does this seem odd? Is there anywhere else I can check, or any other way of finding this out?

Fire_Fox

Sorry ACX but your post sounds like you swallowed the saleswoman's textbook of patter! A 25% loan for your deposit is still a loan, it's no different to having a massive mortgage, they aren't doing you a favour it's a way of shifting more houses for more money in a depressed market. Same with stamp duty paid, it's a way of inflating house prices.

Has the developer really SOLD all the houses in the first two phases, i.e. the sales have completed? Very different kettle of fish to having taken holding deposits or exchanged contracts and suing the buyers for completion (happening in many off plan flats). Three more phases means living in a building site, for how long?

Some new build developments are ghost towns, even the first phase doesn't sell out so you haven't a cat in hell's chance of shifting a 'second hand' house. Other new builds there is a relatively brisk trade for, depends on the quality price size and location.

SJCJDCLSC

Hi there. We are FTBs as well and are currently buying a new build. A lot of people will tell you not to even consider new builds - you are right to worry that their value will drop more significantly than an established house. Quite simply it is about risk - the risk is greater with a house that hasn't had chance to prove itself yet.
My best advice is look around the market and really work out what you both want from a property and try not to be persuaded by sales talk. Remember a new build has a sales person working really hard to sell it whereas a regular house hasn't got all that shazaam to try to make it more attractive. If you decide you do want a new build, ask yourself why (it won't look shiny and new forever). Finally, research all you can about the area/developer and the whole site. For example, we visited another development by the developer that we are buying from to see what their other houses were like and then we also visited a site that was totally finished off over 5 years ago to see how that was holding up.

We are confident in the build of ours and the longevity. We might be wrong but it's worth the risk to us because this house offers us things we want that we can't get elsewhere. You say they can't shift the 4 bed houses..... try to work out exactly why that is.... do you feel they aren't competitively priced? I'd be a bit worried about their financial position if they are changing the plans of the houses to make them easier to sell. Check out the developer's ongoing projects and what they've done in the past....... do whatever you can to see how stable they are as a company, check their share prices if you have to!!!
Make sure you understand this loan aspect too. Don't get carried away with 'oh it'll be alright' - get yourself a financial advisor or someone who can really crunch your numbers.... after your interest free period is over are the repayments going to be realistically manageable? Is there an early-repayment fee? Remember because your deposit will technically be borrowed, your options for mortgage lender are probably going to be narrow. You might have to end up going with a higher interest rate than you're currently imagining because of this.

So, to (in a long winded way) answer your question.... buying a house is a calculated risk and buying new build probably carries more risks but if it is worth it for the gain then go for it! Sounds like you probably just need a lot more research before you can commit to anything though. Good luck.

googler

In an improving market, as you call it, you could probably confidently expect that you could resell for at least as much as you paid.

But let's imagine a situation where your circumstances change suddenly, and you have to sell whilst the builders are still on site. Who's going to be better placed to provide incentives, discounts, etc to sway a deal? If your house is up for sale against an identical empty one where the builders are aowing the buyer a choice of carpets, curtains, appliances, and they can customise it to suit, as opposed to yours, where they have to take everything as is - will you be able to compete?

Also - this is currently anything but an 'improving market' - opinions vary, but the general consensus I get is that things aren't going to improve by very much very soon......

ACX

I understand about the precautions I will need to take into consideration regarding the builder etc, but just wanted to know if, on the whole, a new build at about 15k more than the average for the area is an acceptable mark up when considering the advantages.

On the subject of the builder, the company is explore living, who are owned by Lang O'Rourke. Does anyone know anything about their reputation? From what I can gather Lang O'Rourke are a very successful building company but explore living is a relatively new company. I think I will probably speak to existing owners and see if I can get any feedback one way or the other.

I also realise that the 25% is a loan, but if anyone can show a better one I'd be surprised! As for whether it is an improving market, it may still drop yet but I think that it's reasonable to assume it will improve in the next ten years, which is when I'd [have to sell by to repay the loan, and that's if i can't manage to repay it in the meantime. My partner and i have NHS jobs so feel about as secure as you can in any job.

Fire_Fox

What advantages? The advantage of a new build is personal taste, if that is worth £15K to you then go ahead, it won't be a new build when you sell after all. Redundancy is not the only scenario you should be considering - long term illness or injury, unplanned or difficult pregnancy (twins!), relationship breakdown. Do not be wooed into borrowing more money than you have intended, especially in a depressed or uncertain market.

ILW

New buils always carry a premium. If you are set on this type of house, why not find a two year ol;d one and save 10s of thousands?

knightstyle

Don't forget that house purchase should be a long term investment. I believe that in any 10 year period houses have increased more than inflation. If you sell quickly it is dificult to recoup the selling/buying expenses.
As for the loan, make sure you take independant advice on this and ALL your outgoings.
Our daughter has just bought a similar new build with a 10 year interest free loan, 25% I think from the builder. She and the children can now walk to work and school so they now have just one car and are very happy with the move.
Anyway good luck, I hope it works out for you.

malamay

I looked at a similar deal for first time buyers, where the builder offered the interest free loan on 25% of the property value.

My disappointment while I managed to get them to lower the price, they would not combine this with the 25% loan deal. We could have had carpets, vinyl and a garden shed thrown in, but they would not lower the price and offer the loan.

I wasn't prepared for this, and it really upset me, as I hate paying full price for anything!

Whatever you decide, good luck with it!