What to consider?
There is a constant debate amongst property buyers and professionals regarding the short and long term value in buying a new build home. Given that the UK Government has set out its plan to build an additional 1.5m homes in 2025, more people are going to be looking at buying a new build. So we wanted to look at the pros and cons of buying a new build home.
The good news is that over the past five years, the value of new build homes in the UK has generally increased. However, with some fluctuations and regional variations it is good to be aware of all the potential drawbacks when looking at a New Build
Considerations and Potential Drawbacks
While buying a new build home can offer a range of benefits, there are also considerations and potential drawbacks that potential buyers should be aware of. Understanding these can help you make a more informed decision and weigh up the pros and cons based on your personal situation and needs:
- Premium Pricing
New build properties often come at a premium compared to older properties. Developers often price these homes to reflect the modern design, energy efficiency, and the convenience of moving into a brand-new property.
- Initial Depreciation
The concept of initial depreciation with regards to new build properties can be counterintuitive, especially given the widespread belief that real estate generally appreciates in value over time. While it’s true that real estate is traditionally seen as a solid investment, new build properties can be an exception to this rule in the short term immediately following their purchase.
Initial depreciation refers to the phenomenon where a new build property may lose some of its value in the first few years after purchase before starting to appreciate. This is similar to buying a new car, which loses a significant portion of its value the moment it leaves the dealership. Therefore, if you are looking to take a mortgage against the property, it is always good to consider longer term loan policies v’s shorter term policies to mitigate this initial depreciation.
- Market Adjustments:
The property market continuously adjusts to supply and demand dynamics. If a developer has priced units optimistically and those prices are not supported by the broader market over time, new owners might find that their property’s value on the open market has adjusted downwards to align with comparable properties.
The Stats don’t lie
Despite the considerations mentioned above, over the past 5-years the performance of new build homes (and the wider property market) has been relatively positive. This can be broken down by property type (2020 to 2025):
- Detached Houses: These properties have seen substantial appreciation, with prices increasing by 29.6% since 2020. This surge is attributed to the post-lockdown “race for space,” as buyers sought larger homes with gardens
- Terraced Houses: Terraced homes have also experienced notable growth, with a 4.5% rise in value over the past year, bringing the average price to approximately £235,296.
- Semi-Detached Houses: These properties have seen a 3.8% year-on-year increase, with average prices reaching £307,685.
- Flats: In contrast, flats have experienced a more modest appreciation, with prices increasing by only 3.2% over the past year, resulting in an average value of £168,569.
Market Dynamics:
The demand for larger homes has been a significant trend, driven by the need for more space during the pandemic. However, as interest rates began to climb post-pandemic, smaller property types like flats gained popularity as buyers adjusted to higher borrowing costs. More recently, as borrowing costs have decreased, there has been renewed interest in larger properties.
Current Market Outlook:
As of early 2025, the UK housing market has shown robust activity. Rightmove reported a 1.7% rise in the average property price to £366,189 in January, marking the largest increase since 2020. This rise is partly attributed to falling interest rates, which have boosted buyer confidence.
Conclusion
In the short-term, new build homes can offer convenience, reduced maintenance costs, and lower utility bills, but may lose value after the initial purchase. In the long-term, traditional homes in good locations often appreciate more, especially in prime or well-established areas.
If you are looking for a home to live in long-term with minimal maintenance, a new build may be a good choice. However, if you are focused on profitability and long-term investment, a traditional property in a desirable location may be a more profitable option, particularly if you’re willing to pay more for it and invest in renovations or improvements.
Ultimately, your personal circumstances, investment goals, and the specific property location will influence which option is more profitable for you.
