The idea of owning a brand-new property can be very appealing, but is it likely to be suitable for your needs? We look at the pros and cons of buying a new home…
There were almost 50,000 new homes built in the first quarter of 2021 according to the HomeOwners Alliance. This was the highest figure in over 20 years.
New build properties can be perfect for some homebuyers. Firstly, there’s the appealing idea of owning an immaculate, freshly decorated new home that no one else has lived in. Then there’s the fact that you won’t have to do anything to it. If you lead a busy life, you might not want a project home that needs loads of work. It may suit you better to move in and put your feet up.
A long wait
There’s a belief that buying a new build home can be faster than buying an existing property, but this is not necessarily the case. In fact, depending on how long it will take for your new home to be constructed, you could be in for a long wait.
‘It can take a considerable amount of time to complete on a new build,’ says MB Associates’ Mortgage & Protection Adviser Anthony Blaine. ‘Often, new build homes are marketed and sold whilst construction is ongoing. The builder is keen to get the buyer to exchange contracts usually within 28 days after the reservation fee has been paid. However, it can then take months for a purchase to complete, which can cause some big problems with mortgage offers expiring.’
If you’re a first-time buyer purchasing a new build, having a long wait may not be too much of an issue if you have no chain. However, if you’re selling an existing property, it could cause complications. ‘If you are involved in a chain, you may need to check that your buyer isn’t in a hurry,’ says Anthony.
Many positives
However, there are many positives to buying a new build home. New properties are likely to have better insulation than existing properties like period homes. At a time when the cost of living is increasing, your energy bills should be lower. And you’ve also got the option to move in and do nothing. Your new home can be a place where you simply rest up or a blank canvas.
If you’re struggling to get onto the property ladder, buying a new build home may also mean you can take advantage of the government’s Help To Buy Equity Loan Scheme. The scheme was launched in April 2021 and offers first-time buyers a chance to buy a new-build home with the help of a government loan of up to 20 per cent of the cost of the property, or 40 per cent in London.
According to the Home Builders Federation, 16,000 new homes have been bought using this scheme. To qualify, you must be able to afford at least five per cent of the cost of the property. The scheme is set to run until March 2023.
Some new build companies will also offer extra incentives to entice you. Some cover the cost of your stamp duty or household items like carpet costs. There’s usually room for negotiation where new build homes are concerned.
Buying off-plan
However, if you are considering a new build home, there are some potential drawbacks.
If you are buying a property off-plan, bear in mind that the service charge may change, which may affect affordability for the mortgage and/or Help-To-Buy equity loan scheme, and you may be asked to exchange contracts before you can physically view the property.
Lack of space may be an issue. Developers are keen to fit as many homes into the land as possible, so the rooms may be smaller than you’d find in an existing property.
Your new home might also fall in value during the first year or two, as it will no longer be new (you tend to pay a premium for a new build home). If you are buying a new build, it’s best to have a long-term strategy and plan to live in it for a number of years.
Your new home may also have a few minor faults that need to be remedied. It’s advisable to get a snagging list, which is a list of all the issues that come with a new build property such as damaged paintwork or small unfinished jobs. It may flag up issues such as plaster not being smooth and even, walls not being straight and large surface cracks in the walls.
Although you can find your own snagging list online, it’s best to get a chartered surveyor to carry out a snagging survey on your behalf.
Mortgages on new builds
When it comes to getting a mortgage on a new build, interest rates aren’t necessarily more expensive than on existing properties. However, there may be fewer mortgage options.
‘The market might be smaller because some lenders require a larger deposit for a new build home as they attract a higher price point and potentially may not hold their value in the short term,’ says Anthony. ‘However, most of the big lenders have a good appetite for the new-build market. Some new builds may give cheaper borrowing costs in the short term, as this could open up the opportunity for buyers to access the Help to Buy or Shared Ownership schemes. However, these schemes aren’t suitable for everyone so it’s important to seek advice from an experienced mortgage broker.’
More Information
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