According to the National House Building Council (NHBC),
more than 26,142 new homes were registered to be built in the South East last
year, on par with 2016 levels of 26,147 dwellings. Great news when you consider
it is one of the highest number of new builds in the region since the
pre-recession levels of the Credit Crunch and the uncertainty of Brexit and the
General Election.
So, when a landlord recently asked me why the brand-new
property she was considering buying was a lot more expensive compared to a
second-hand/existing property of similar type, accommodation, location and
structure I thought this would make a fascinating topic to do some homework on;
homework I want to share with the homeowners and landlords of Mid Sussex.
You might believe that the difference between
purchasing a new build home against purchasing a second-hand/existing home is
just individual preference. Some buyers/tenants like the ostentatious trendy
modern feel of a new home, whilst others like a home that has stood the test of
time.
So, what is the right answer? Well, I am
going to be looking at some statistics that shows there is a real difference in
the Mid Sussex District Council area’s property market when in to comes to new vs existing homes and the price paid.
Looking at the average price paid for existing (second-hand) versus a brand new
home since 1996, one can see from the graph it makes interesting reading.
On this second graph, one can see the percentage difference in
average price paid between new and existing;
Yet possibly nothing is ever that easy, as there are issues with these statistics.
The overall average for the whole Mid Sussex District Council area for
the ‘new build premium’ (new build premium being the additional price a buyer pays
for buying a new property compared to a second-hand one) over the last 21 years has been
7.3%. These statistics actually show that it is problematic to compare like
with like because it is impossible to completely separate all the different
factors of type, accommodation, location and structure etc.
One would have to have a mirror image second-hand Mid Sussex home and a duplicate
new build right next door to each other, then calculate out which Mid Sussex house
buyers or buy to let landlords would pay more for? Perhaps if everything was
the same (all things being equal),
there might not be any difference in what buyers would be prepared to pay. But
then again, it’s like new cars versus cars that have a few hundred miles on the
clock; there is always a difference on the forecourt, because things are never wholly
equal.
What I do know is that my statistics of the Mid Sussex property market show
that new build apartments are worth more to people than their second-hand equivalents,
whilst the difference is negligible between new build detached houses and second-hand
detached houses.
However, I believe
the really important lesson in all
these statistics is the fact that ‘new build premium’ for new-build versus
buying a second-hand property increases in a buoyant market and reduces in a
tougher market. So, if you want to buy
new and the only consideration is money, try buying in a tougher challenging
property market. 