House Conflict - New Build or Not

[JediStoleMyBike]

Looking for a bit of advice as I am not sure where to turn.

Husband and I have a couple of choices of property to buy, both with pretty major hang ups and we're not sure what to do. We keep thrashing the issues out and are coming up with the same 'I don't know' response and so I'm hoping others can weigh in with some experience. For clarification we have 1 daughter.

House 1:
£155,000 and needs a lot of work. Semi-detached 2 bed. We will need to update staircase, have electrics sorted (as DIY extension cables with plugs to light fittings are everywhere) as well as lay new floors and move the boiler, which is currently in second bedroom.
There is no dining area, just a long and thin kitchen. Conservatory which we could use as a dining room. Stairs in living room so we are already losing space, would struggle to fit a dining table in the living room.

House 2:
New build, £199,999 and ready to move into. Can use the Help to Buy scheme (but obviously worried about the 20% loan and ability to pay back while in interest free 5 years). Lovely area and much more space than house 1. Freehold. No charges to pay for upkeep of area, etc. No conservatory, kitchen-diner and WC downstairs.

Really, we are stuck between the space and possibilities of house 2, countered by the fact we'd have to use Help to Buy loan to buy it and house 1 which needs a lot of work, is pokey but we won't have the equity loan so when we came to sell we'd (hopefully) get what we paid for it back. We much prefer house 2 but if we want to sell, we are worried we won't make what we put in back. Houses with 3 bedrooms are going for £180k+ in the same area.

Any advice / experience gratefully received.

I would be very concerned about spending all that money on a 2 bed semi. You may end up spending more than you could buy the new build for, and could easily spend more than the first house is worth. I'd go with the new build if it's within budget.

Both are within budget as we can get the equity loan on the new build.

Not sure how much work will cost on house 1 but we've been quoted approx £2k for the stairs, £1k for the boiler (contractor in the family) but not sure about electrics yet.

Yes but somewhere like that I'm guessing will need complete redecoration and possibly a new kitchen and bathroom too? Soon adds up. And if you spend 25 k, you could have bought a 3 bed instead. That would be my thinking anyway

Kitchen isn't too bad actually, bathroom will do for now but will eventually need work, yes.

What are the areas like - are they comparable?
How long are you planning on living in the property
Does house 1 have room to extend in the future
What are the schools like
Local amenities - parks, shops etc within walking distance
Personally I'd go for the new build unless there was something very special about house 1. The layout sounds poor for family life and it might require more work than you can see right now if it's been poorly maintained. Such as roof, pointing and windows.
New build have everything done, are energy efficient with excellent insulation properties, the layout sounds better and if it's a lovely area the resale value should hold well or even jump up, in a fairly short space of time.
Are the 3 beds you mention at 180k old or new build? New build in lovely area should fetch more.

To be honest the lack of dining table or space would be a deal breaker for me. How old is your dd?

House 1 does not sound very appealing. What do you like about it? Is there an option 3 in the area?

House 1 is in a fairly retirement heavy area so bungalows are snapped up sharpish. I would say 80% population is over 70.
House 2 in a more diverse area. house 1 looks fairly shabby on the outside and is in a fairly dense estate whereas house 2 has been built with a cottage feel (forgot to mention it's a mid terrace) and is set back, overlooking some fields.
We are planning to live in the property for 5 or so years depending on husband's job. We may stay there longer but ultimately our dream is to extend our family and eventually seek a 3 bed when we are able to. We may look to move to a totally new area but that's all pipe dreams for now.
There are shops, doctors surgery, pubs, parks in walking distance of both.
With regards to an extension I think you'd be able to knock the conservatory down and build there, as it's a rather large conservatory for the size of the property.

The thing that scares us away from the new build is the 20% equity loan. If we can't sell the house for what we paid for it when we come to sell we'd be even more stuck as we'd be in negative equity (potentially) and owe the government 20% of the house value still on the loan.

House 2. House 1'isn£155 and needs a lot of work / money. And three beds are £180? You would struggle to well it for enough. How many children do you plan to have and when? You might outgrow it quickly.!

Dd is 3 months.

I don't like anything about house 1 really but it's an opportunity to buy in an expensive area and is close to my husband's work. We works shifts and therefore has to travel to work twice in one day, morning to mid afternoon and then early evening to late at night. It's handy for him.

House 2 is close enough to his work, at a 10 minute drive.

We plan on two children. Another in a couple of years if we are able.

If your main hang up on house 2 is the resale value after the equity loan - if it's so much nicer (which it sounds!), it will presumably sell for more than house 1 anyway - enough to make the loan factor not really such a big problem?

(That wasn't worded very well, sorry!)

Can you work on saving enough each month to work towards paying off the 20%?

Eyedrops - I may be looking at it wrong but as with most new builds I worry if we sell it won't be valued at what we paid, and instead less. We will then still have to pay the government back based on the new value so we'd have next to no equity to move on and would therefore be back at the start of the ladder again.

Am I looking at it wrong?

We probably wouldn't be able to save enough to pay it back before the 5 years is up. We'd struggle to save half.

thay can be true but not always. Now is a good time to negotiate hard to get the price down though, to reduce this risk. House 1 will end up costing you way more than you think, and will be a pain to live in when you are trying to renovate with a toddler.

Jedi - I thought your dd must be really young if the dining table situation wasn't an instant no-no. you will definitely want a proper dining table or area as she grows up, even more so if you have another child.

Jedi - what has been the performance of house prices in your area? New builds don't always drop in value, I've known some to shoot up if they are in a decent area with good transport links, amenities etc. Only you can know your local area, but good areas usually perform comfortably and ride market fluctuations well too. Are the wider house areas known for being stagnant? Negative equity? Border anti social areas?

Thank you for the good points to think on Poirot!
It does worry me that there's no dining room in house 1, we were thinking of using the conservatory as other people said that it would be warm enough all year but I don't remember this being the case with conservatories.

I've attached a couple of pictures from Zoopla that indicates house prices in the area of the houses.
Picture 1 = house 1
Picture 2 = house 2

Sorry for my ignorance. I know it must make me look stupid but we are first time buyers and trying to get this all sorted before I have to make a decision re going back to work so we feel like the pressure is on. We just need to get on the property ladder.

I've just realised on looking again that it's the same details for both 😓 It's searching in the wider postcode instead of village to village.

Floorplan for house 1 = picture 1
Floorplan for house 2 = picture 2

Gardens are about the same size. House 1 has a slight curve inwards to it and house 2 is a perfect rectangle.
Both have parking for two cars slightly away from the property, house 1 is separated by a footpath. House 2 has parking for all the terrace houses in a small block directly opposite the row.

You pay back 20% of the value when you repay, whether it goes up or down so if you pay £200k & get a £40 loan & it drops to £100k, you only repay £20k

I'd go new build. We have one and it's been so easy

House two. No diddly doubt about it.

I would go for house 1 but I'm not keen on new builds and housing estates. The quality of most new builds are not great, particularly sound proofing and if you have young children this could be difficult. I think you will make more money doing up the property. We have a conservatory which doubles up as a dining room, which works well.

My worry with house 2 (even though I much prefer it!) is if we can't get the value back because it's not a new house when we come to try and sell and are left in negative equity that will put us right back at the start of everything owing the bank / government money whereas house 1 we should we able to flog.

Or am I being really naive about this?