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When considering buying a brand-new home, like any purchase, you need to know whether or not you are making a sound financial decision. Whilst you may see it as a home you have to remember this is both a major financial commitment and an investment decision that needs careful consideration.
In this article we look at some of the essential things you need to consider
With a new build home everything from the building itself to heating, plumbing carpets and kitchen units is new and therefore you will not have to spend money on upgrading and repairs
New building meet today’s standards in energy efficiency being made with improved insulation and double glazing and boiler efficiency.
If you want to know what a homes’ energy performance this can be found via the governments the Energy Performance Certificate website, if recorded, see: Governments Energy Performance Certificate This increased energy efficiency could save you money on your energy bills and those savings could mean additional spending money or savings
Most new build properties come with either a 10-year warranty from the National House Building Council (NHBC), or other insurance backed guarantee which may be in addition to warranties or insurance offered by the builder.
You might think this is all you need but like any insurance unless YOU highlight the issue this will be missed and at the end of the warranty period YOU won’t be able to claim
One of the best ways to ensure the house has been built to a good standard is by having a New Homes Snagging Report New Home Snagging Report
This is an independent surveyor’s inspection and report conducted on your behalf and given to the builder to highlight not only any significant defects but snagging issues that should be repaired before you move in. Remember, if a drain is full of builders rubble and becomes blocked the cost of unblocking may have to be paid by you if you did not notice this before you moved in!
Broken roof tiles
Drains full of debris
Punctured damp roof membrane causing dampness
Damaged , scratched or dented fittings
Delays and missed deadlines costing you money
Should you wish to complete the purchase of the property prior to the works being carried out your solicitor may recommend that a sum of money be retained from the purchase price.
You may be able to choose a limited range of fixtures and fittings and have input on the finishing touches. Some allow you to choose things such as kitchen work surfaces and flooring which will really help make the house your own.
In addition to this, if making the house your own is a big deal to you then having a home which nobody else has lived in will have a lot of appeal.
Various Government incentives are available including Help to Buy. The help to buy equity loan is designed to help first time buyers and home movers move into new builds. Deposits are set at 5% and the government loans you up to 20% of the property’s value (which is interest free for 5 years). This means two things; you require a smaller deposit, and you will only require a mortgage for as little as 75% of the property’s value. Of course, it is not all positive with potentially expensive admin fees among other things.
The starter homes initiative is another incentive designed to help first time buyers aged 23 to 40 get onto the property ladder by building new homes which are then sold with discounts of 20% or higher. There are stipulations but overall the initiative is to the benefit of who meet the relevant criteria, helping them purchase houses priced up to £250,000 (or 450,000 in London) at below market value.
In this section we will cover some of negative aspects you will need to take into consideration before deciding whether to buy a new build home.
New build homes carry a premium price due to the prestige that owning a new home has- like any other new product, also factors such as builder incentives, fixtures and fittings can inflate the price but if you need to sell early the premium you paid may be lost
Other factors such as the starter home initiative and help to buy scheme are all incentives
These higher prices naturally mean larger mortgages and the interest on this will mean you are paying for items such as carpet and fittings over the life of the mortgage, typically 25 years
If you have to sell during the construction phase or close to a next phase release, like any product if there are lots of houses for sale the buyers will have a choice and you might not recoup the purchase price
Best to ask how many houses of your type are being built and what phases are to be built and when and do some research about past house sales from the Land Registry
The builder might give you a move-in date but beware this is only a provisional date and generally not a fixed date
Buying “off plan” can be a headache as weather, construction labour shortages and builder postponement to enable sales to proceed at a steady pace can bring major delays and postpone your move in date. You will have to consider what you will do if your rental agreement is up or your existing house sale is lost due to delays. If you move in with friends or family, where will you put all of your furniture etc. This can be an additional inconvenience and expense.
In recent years many builders have sold the house on a Leasehold basis instead of a Freehold basis
Freehold is where you own the land and do not have to pay a yearly ground rent.
Leasehold is where you do not own the land but have to rent it on a yearly basis and pay a ground rent. In this situation you may find that they only offer a 125-year term and the annual rent could go up every 10 or more years. This will also mean you will have to get the permission of the Freeholder (the person who owns the land to build and extension or modify the outside of your home and they could charge you a high fee for this)
Living on a construction site can be dusty, noisy and dangerous for children. The surrounding homes could be under construction for months or even years after you move in.
We hope this article has highlighted the main considerations you should make when deciding if to purchase a new build home, but we are aware there are other aspects not discussed in this article.
If you are buying a previously owned home, then you may want to consider having a surveyor view the property first. Hiring a surveyor could save you a lot of money in the long run. Find out more about this in these two articles; “Discover how a survey can make you money on your next home” and “Surveyors - Top 10 list of how they can help you improve your home”
Moving and Improving is a community, if you have a new build story- positive or negative, that might help us all please share it with us in the comments section below. We’d love to hear from you!
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