Yes, another awareness day, or week in this case… New Homes Week 2022 is running from 21st to the 27th of March and provides the perfect opportunity to discuss all things new build. New builds are the marmite of the housing market. One side of the fence tends to see all the positives and the other side focuses on the potential negatives. In this blog we’ll look at both sides of the argument and analyse the current state of the new-build mortgage market
Starting with the positives of new builds, the obvious one is not having to live in someone else’s home when you move in. New homes are a blank canvas which you can make your own without any restrictions based on what the previous owners have done. New builds often have a community feel, particularly on larger developments, with investment into the surrounding infrastructure and the creation of green spaces. New homes are typically more energy efficient than older properties which can save money on ever-rising utility bills as well as more affordable home insurance premiums and even access to cheaper mortgage products. Another big plus of a new build is the warranty. New homes are generally easier to maintain but if things do go wrong, be it cosmetic or structural, having a warranty in place often means it can be sorted out cheaply if not for free.
Drawbacks around new-build properties should be acknowledged although there are common misconceptions which can unfairly give new homes a bad name. New builds can often have smaller rooms, smaller gardens and little scope for structural changes to the property due to the close proximity of neighbours and lack of surrounding space. As with any profession, there’s good and there’s bad. Most new builds are built to very high standards as required by regulations. However, those which aren’t often give large scale developers a bad rap. Perhaps the biggest new build drawback is the ‘new build premium’. As with anything new, you pay more for the privilege of having a new home than you would for the same property if someone had already lived in it. However, it isn’t true that new builds are a bad investment. If there’s short-term capital depreciation due to the new build premium effect, this doesn’t mean there won’t be significant long-term capital growth. What makes a good investment depends on many more factors than just whether it’s a new build – every property was a new build once!
For many people, it’s often not that they have any aversion to new-builds but they just simply prefer older properties. The look and feel can be very different with people often citing the character an older property can have as the big draw.
The new-build mortgage market has come a long way in the last few years. The advent of the Help to Buy Equity Loan in 2013 changed the landscape for buyers and developers with the demand for new build property increasing exponentially. Outside of Help to Buy, but perhaps in anticipation of the scheme ending, there has been an increase in availability of low deposit mortgage options on new-build homes. Across the market, standard residential mortgages are readily available on new build houses with just a 10% deposit and some lenders will even do this with a 5% deposit. On flats and apartments, most lenders will require a 15% deposit but there are some happy to consider just 10%. Lenders have ample data on new build property prices to make the informed decisions and calculated judgements on lending policies. While some are still behind the times requiring high deposits, most are ready and willing to lend.
The Help to Buy Equity Loan being phased out early next year will likely have a ripple effect throughout the new build sector. Effects may even be felt sooner with many developers being forward sold. Since revisions to the scheme in 2021, around 10,000 first time buyers every quarter were using Help to Buy to get themselves on to the property ladder. It cannot be understated how important this has been. Government figures as of June 2021 report since the inception of the Help to Buy Equity Loan, the scheme has helped purchase £94.4 billion worth of property by providing funding totalling £20.9 billion. Following Help to Buy is a big challenge and new schemes such as Deposit Unlock and the First Homes Schemes are at the forefront of the market push. Co-operation between developers, mortgage lenders and new market initiatives are required to create a successful scheme. Whether Deposit Unlock and the First Homes Schemes can fill the hole left by Help to Buy will be shown in the years to come.
If you’re in the hunt for a new-build property and you’re looking for a professional, no-fee mortgage broker, look no further! We love dealing with new-builds and are able to meet the fast turnaround times often required by major housebuilders. For more information on new-build mortgages or any other mortgage and life insurance queries, feel free to get in touch.