To wonder why new builds are so overpriced?

[chickenlittle2020]

Been browsing properties as wife and I are hoping to get on the property ladder within the next few months. We've looked at new builds using help to buy and the government equity loan. They just seem so overpriced! For example, this property - no proper garden, not much space, little character on for £629K. Its so overpriced for similar older houses on the market.

www.barratthomes.co.uk/new-homes/united-kingdom/h749401-new-mill-quarter/plot-447/

Anyone shed some light on this madness???

I think that's less of an issue here - help to buy in Scotland has a fairly low cap so is only really available around us on starter sized flats mainly.

Profit. Housing in this country is seen not as a human right but a money making opportunity.

So the boss of Persimmon can have a £75 million bonus of course

Most of the problems with the property market have their root in the 1947 Town and Country Planning Act which has caused all sorts of distortions but fundamentally means the supply of property is less than the demand and the gap grows every year.

Help to buy is an example of the government dealing with the effects of the act without sorting out planning properly. It is putting money towards new builds which has pushed up the price of new builds.
In addition there's a premium the same as there is for new cars and like new cars it loses some value the moment it's used, although if you get a discount when buying you can mitigate that. If you find out when the company's financial year end is that's when you'll get the biggest discount and the management will want to get the best bonus they can.

On the plus side you should get a 10 NHBC warranty and everything is made to the latest building regs which on insulation and electrics is a good thing but often results in paying for things you don't necessarily want or need.

New builds are pristine so you can get by in the first 5-10 years without any maintenance at all and still have a house that is nice. Also they are cheaper to heat.
That said, I would avoid anything by large national house builders. The service is notoriously poor, and the finish is basic. If you buy from a small local developer, you almost always get more value for money.

When we bought a house recently I looked at new builds and slightly older houses (10-20 years old) in the same area (literally one or 2 streets along). The new builds looked lovely but a 3 bed new build with parking for 1 car and no garage was 30-50k more expensive than 3 bed slightly older properties with bigger rooms, parking for 2-3 cars space and a garage. The developer (who I happen to know, I assume they don't share the info with everyone) told me that many of the new builds were bought by first time buyers using help to buy or shared ownership and on that basis the buyers could get a mortgage for the new build but would struggle to get approved for a mortgage on the cheaper older properties.

I feel really sorry for the (mainly younger) people buying the new builds on this basis as I suspect that in a few years time when they come to sell they will find they have little or no equity.

I'm surprised that anyone is denying that new builds are usually overpriced and at risk of losing some their value - almost all mortgage lenders think they are, which is why they usually have a lower maximum LTV ratio and sometimes also higher interest rates on new builds; they're not as safe a bet. This is particularly true of new build flats.

Totally agree with you OP, round here all the new builds have tiny gardens, tiny lounges but a 4-bed has 3 bathrooms (who needs 3 bathrooms?!), and they cost around £100-200k more than older 4-beds with more space.

Where I am from, so many very expensive new builds have gone up on land that locals know is essentially marshland. The only reason the land was never built upon before was because it wasn't considered good enough in the past. Put a shiny new home on it and people who don't know the area snap them up, totally unaware...

This is a big problem where I am, too. They're building on all the flood plains; there's a reason why there weren't any houses there before!

I do wonder if there's a bit of social engineering goes into decisions to pay that sort of money for a house that is basically shite. There's a new estate of this type thats been thrown up in the last few years in a town near me and there's an odd identikit vibe about it. Every house has the same genre of almost new "quality" car about it, the same style of play set in the garden and the same style of "personalisation" in each privately owned house.

Presumably the people who live there have chosen to do so because they want to live among people like them. Nothing wrong with that of course, and given the choice of that or living on a sink estate I know where I'd rather be. What I think it does demonstrate is that if you choose to live in a place like that then you're not paying for the house but paying for the privilege of having neighbours who can afford to live there (and therefore probably have well paid jobs and similar aspirations to you).

Apart from not liking them aesthetically they're not generally built to last past their 5 year warranty, tend to have small gardens and are always too expensive. I think though people like them as they won't have to spend money straight away. They're decorated in a neutral way, new clean bathroom and kitchen. They're seen as a known quantity so there is unlikely to be an immediate problem to fix.

Yes, we have new builds here, 4 bed detached are £560k

Or you can buy a completely renovated 4 bed detached in the village, with bigger garden for £400k.

Why would you pay £150k more? I don't understand.

@IfIHadAHeart no. My DP and I are in our 30's along with our friends and most still flat share with friends

Help to buy has certainly pushed prices up.

IMO a lot of people are seduced by the ‘everything shiny new’ factor, and, (as they think) no problems/maintenance/decoration for a few years. Too often to find out the hard way that this is not the case, though I know some builders do still have high standards.

When I was looking at flats in a non-central London area with a dd some time ago, there were new build flats of 45/50- ish sq m going for the same price as e.g. many purpose built, 2 bed Edwardian maisonettes of 68-70 sq m, in much nicer roads not far away, no further from the tube station, with on-road parking (none at the new builds) and many with their own tiny garden or outside space. Many had also been very nicely renovated - if not they’d be quite a bit cheaper.

And typically the older properties would have way lower ground rent/service charges. Usually a small fraction of what they’d have to pay at a newbuild.

Yet the new flats were selling, and I doubt whether it was all to landlords. I can only think people were seduced by very cleverly staged, shiny and ‘stylish’ show flats.

We've got some new builds in our village. They're on for around 15% more than other older properties with the same number of bedrooms. Except the older properties have bigger, mature private gardens, larger rooms, storage and aren't overlooked. There's no contest.

A friend paid a premium to buy a show house from a v well known developer and had so many problems. Space saving solutions like hiding the cisterns and other plumbing in the wall were great until it turned out none of the plumbing was fit for purpose and it all had to be ripped out, exposing massive leaks and damage. The guttering, fascias, drainpipes etc were all the wrong size, the house wasn't water tight. Water was running down the walls 4 months after they moved in. The problems were immense and the developer fought all the way, refusing to fix the problems. They ended up locked in a legal dispute which they won but then hated the house so much that they sold up and bought an older house. Being the show home, it looked like it was thrown up to get buyers through the door.

Regardless of the premium, newbuilds have the unique appeal of ‘nobody has ever taken a crap in my shiny new loo or nobody has died in my bedrooms’. It’s something I’ve heard many times in conversations so it is probably a factor. I also had a couple of friends who would hop from one newbuild to the next after a few years - selling a fairly new newbuild with the remainder of the 10-year warranty seems to get a better price, so they move whenever they start missing the new-house smell.

I'm confused about this too. A big estate has been built next to our village, and most of it is rows of tiny 3 beds, which you can buy on shared ownership. Which is good if it helps people get on the property ladder. But then at the back of the estate, there are 4/5 bed 'executive homes' in the 600k bracket. For context, I live in an area where 600k would get you a big detached house surrounded by gardens just down the road. I don't get why people who had that kind of budget would want to live on an estate which is nice enough, but is pretty cramped and concretey. A year later and loads of the residents are already selling their homes and they've been sad facing in the newspaper because the build quality is so bad.

I did wonder whether it's some sort of tax thing that builders do. They know the big places won't sell but they can write them off or something?

New builds definitely aren't more expensive in my part of the world. The big draw here is 'characterful' Victorian / Edwardian houses, even quite small terraced ones. We bought our edge of town centre terraced newbuild for 165k five years ago & its now valued at 220k. We would pay much more for one of the smaller also-terraced Edwardian-era houses literally round the corner.

I wouldn't say all new builds are shit either. Ours is a small development by a local company & is pretty decent. Its definitely an improvement on undoing several decades of other peoples' shitty DIY & horrible decor

Yep new builds are crazily overpriced!

We were looking at new builds a couple of years ago, thinking about using the Help to Buy scheme.

But in the end, here is SE London, new build 3 bed flats were almost 600k (the upper threshold for HTB)

Now finally in the process of buying a 2 bed maisonette, much more in our price range, concerned about space for all 4 of including 2 young DS, but that's for another thread!

People buy what they can afford and want to buy. I would hate anything with low ceilings and beams, single glazed windows, little insulation, older heating system and no off street parking. Other people might love that.

I’ve lived in older houses and new ones. The maintenance and refurbishment on the older ones was very pricey. It also depends on the developer building them. There are some I wouldn’t go near, but others are better quality.

I’m not keen on character properties with out of character kitchens and bathrooms. Horses for courses.

@chickenlittle2020

If you decide to look at new mill quarter beware!

There is an issue I believe that they are tied into a single very overpriced energy supplier. Something to do with conditions in the development.

And as an aside I live nearby and would not live in hackbridge at that price!

They aren't "overpriced". Houses are worth what the market supports, which is what people are prepared to pay for them.
If people are buying the new builds at the prices they are marketed at, they are not over priced, they are merely expensive.

I agree, we went to look around a new build and then was astonished by the price once I'd seen it. I even ended up asking the salesperson if the price was correct, it was ridiculously high for a tiny house in smelling distance of the local tip!

I wouldn't say all new builds are shit either. Ours is a small development by a local company & is pretty decent. Its definitely an improvement on undoing several decades of other peoples' shitty DIY & horrible decor

Yes - I think the key is to buy from a good builder. Ours has risen considerably in value in 5 years. The rooms are all big - first time I've been in any house where all the bedrooms could fit in beds, wardrobes and cupboards and still have room to swing the cat. Our older houses has character features, but when it came down to it, the bills to maintain, repair or replace them were huge. Our heating costs are so low it's a joy, though it is hot in summer. It's an unusual development as the gardens are all big and parking is never an issue.

I've done the renovation route several times - but for me, it's new build for the future.

The house in OP's posting seems ridiculously priced, but then I don't know the area.

I am currently buying a new build, FTB and using the help to buy. Originally we were going to get a standard mortgage, with a 5% deposit but then covid hit and the market went to shit.

Our developer is relatively new to the game and has built a small development of 40 houses. We have a big garden so can extend in the future. I reserve further judgment until I moved in!