Do brand new houses go up or down in value?

nh

My parents are looking to buy a brand new house off-plan, thinking that in five years the house will have gone up in value more than the house they live in now (a Victorian terrace).

What they want is to sell the house they live in now, buy something else, live in it for five years till my dad retires, and then move near to the sea (they can't do that now cos it is too far from dad's work). The house they live in now has been valued at £200,000. They think if they spend £200,000 on a brand-new house, the brand-new house will be worth more in five years than the terrace would.

I think they are bonkers.

I was under the impression that brand new house go down in value in the first few years? Can anyone confirm?

littlereddevil

Mine certainly went down in value.I think new houses always do as you pay over the odds for them

lisyloo

In general you pay over the odd for a new house (rule of thumb 10%).
So relative to other property they go down (which might mean they go up less in a booming market).

I agree, that they are bonkers over the timescale they are looking at.
Also bear in mind the transactional costs.
There are all the usual ones - stamp duty, legal fees etc.
But in this case they might also find that they need to landscape the garden, decorate it (unless they love magnolia) and carpet and curtain it.
In any house there is work to be done to get it to your own taste but with a new house there can be things that aren't done at all e.g. back garden might be just mud.

I think you are right and you should try and talk them out of it.

Jacster_2

nh wrote:

I think they are bonkers.

You're right. I own a new build and bought it because it suits my needs at the moment. My dream house is an older house, but right now I can't take on the maintenance.

I bought the new house in the full knowledge that I am likely to be 'at a loss' for a few years - especially with the way the market is going right now. However, I bought it for a home first, and will wait the time needed for the investment benefits. Negative equity only matters if you're moving!

At the time of buying, the market was starting to slow and I got a discount. In this current market, never, ever, ever pay full price for a new build. If they are determined to do this, get them to go round all the new developments and look for deals on cancellations with short entry dates.

Or, better still, talk them out of it. My lawyer told me that when the market starts to slow, it is visible first in 2 sectors - ex-local authority and new build.

Good luck.

nh

Thanks for your quick replies... I knew I was right!

terrierlady

trust me to throw a spanner in the works....
buying one of the first few plots on a large development can earn you pounds by the time the last homes are released.

Paul_the_Painter

There are loads of little things that just are not there in a new house, no doorbell generally (esp at the £200k mark) no loo roll holders, no shelves anywhere. The paint used is shocking, not only is it always magnolia, its rubs off with a damp cloth, and marks shockingly easily, every new house also settles to a greater or lesser extent, so hairline cracks between the walls and ceilings are the norm after a year or so.

My advice is to buy a new property, preferably one of the last on the development(less hassle from builders around, and should be able to get a nice discount) when they retire, so as they go into retiremant they have no worries about things needing replacement. Brand new boiler, wiring etc. but bank on painting after 2 years, but not before one - got to let the house settle as far as it is going to.

First houses on developments can offer good savings, but do they want to spend the first 2 years of their retirement on a building site? There is a reason the first houses are cheaper!

lisyloo

Negative equity only matters if you're moving!

Or if you are forced to move e.g. divorce, redundancy, death, sickness, accident etc.

These may sound extreme - but the DO happen (all the time in fact).

Apologies because this is off topic (but I think it's important for negative equity not to be treated casually).

lisyloo

The paint used is shocking, not only is it always magnolia, its rubs off with a damp cloth, and marks shockingly easily

This "paint" is not normal paint.
It is a special paint designed to absorb moisture from the house drying out.
It takes a full 6 months for a new house to dry out.

Another reason not to paint the house immediately (although you should wait longer than 6 months for settlement cracks unless you don't mind painting frequently).

Sorry for going off topic again - but I thought someone might be interested in the information.

paulherts

It depends on what sort of deal and the price you pay.