20% Premium On NewBuild

billybear1

Hi there, my friend is coming to see me at the weekend and is considering buying a new build house, which, he states, has a 20% premium on it due to the build quality and energy efficiency. With this 20% extra premium as the market picks back up it will grow at a more substantial rate than the increases on an older house.

When he told me that, I just laughed and said "No that's just the premium the builder has put on and admitted to putting on. That is why you should avoid a new build as in 3 years it will have normalised and no one will care that it's an A rated Vs a C graded house that is 20% cheaper."

Still, what are your thoughts on this?

CLAPTON

indeed, a 'new' house is only new once.

System

He loses about 10% as soon as he moves in. It's like getting a new car, loses value as soon as you drive it off the forecourt.

Graham_Devon

Theres a premium of around 10% on a new build.

But you also have to weigh up the guarantee, the fact everything is new (boiler, windows etc). A new boiler and windows for an older house could cost the same as the 10% premium.

So it's horses for courses really. If you intend to (and do) live there a while, the advantages could outweigh the premium.

20% premium however seems a bit steep.

billybear1

I did explain this, still THE SALESMAN told him about the energy rating, so it must be true!

daveyjp

Ask him which level of the Code for Sustainable Homes it has achieved. For 20% premium it should be code 6.

It is possible to achieve Passivhaus level for 20%, but I doubt any major developer has done it as in the main they don't know what Passivhaus is.

brit1234

If you take out a mortgage on a newly-built property that represents a high percentage of the value of the property – between 90% to 95% in this case - there are some things you should consider. Some new-build properties include an extra premium on the sale price that can reduce as soon as someone moves into the property. This potential reduction in the value of the property is an important factor you should consider when buying a new home using a higher LTV loan. If house prices fall, you may not have enough money from selling the property to repay the mortgage.

From the Council of mortgage lenders.

http://www.cml.org.uk/cml/consumers/newbuy

billybear1 With this 20% extra premium as the market picks back up it will grow at a more substantial rate than the increases on an older house.

That is complete fictious salesman speak and they should be reported. Which developer by the way?:D

billybear1

I'm not 100% sure if I am honest, although Taylor Wimpy did come up in conversation (I am based in Norwich, he is in St Ives and they have developments in both) so not saying it is them, but it could well be.

noodle_doodle

"new" means untested

That's why "untested" homes usually have snagging lists miles long that the builder puts all their energy into wriggling out of fixing.

I'd rather have stuff that's already been tried and tested and shown to work thanks

Sampong

The build quality bit is b*llocks. Cheap material and no offence to subcontractors but you don't exactly get craftsmen on site these days.

Housebuilders have to comply with energy efficiency requirements and obviously this is an additional cost to their business which they try to pass onto the customer. The question is; is the energy efficiency worth an extra 20% to the customer? The answer is probably no.

grizzly1911

We brought our house, 2 years old, at 10% less than the original purchaser paid some 15 years ago. in an area doing well for sales generally.

Had a colleague who brought property as an investment 10+ years ago (eventually left to do it as a living) who would often buy one of the first house released and buy the time the site had built out he had made a paper profit of 10/20 % as the builders tended to increase the price of later releases.