How to judge whether this new build premium is too high?

[DecisionTime123]

Looking at a new build in an expensive area, £590k 3 bed terrace. I've looked on Rightmove and you can buy a 3 or 4 bed detached in the same area for that price, or a 1930s 3 bed semi for around £550k and obviously these come with bigger plots, older houses etc. BTW I know some people don't like new build, but some do and of course that comes at a premium, but my question is: is this particular premium too much?

Also the estate is probably going to be developing for the next few years so even more houses at that price will come on, whilst the one I am looking at will still have that new build premium attached, whilst being a few years old. Feels like there must be some way to objectively weigh this up?

(Not looking for advice saying just don't buy new build, cancel the cheque etc 😊)

Is the new build house detached?

Does the property come with communal ground maintenance charges?

Yes it’s too high. Also, you don’t want the comments but I can’t imagine why you would want to buy a new build with what is a very high premium. Smaller rooms, smaller garden, no infrastructure, longer walks to shops and services (generally).

It says terrace

seems a lot but you would need to compare over all house size as well as condition

yes there will be service charges @kaypop and @itsthetea the proposed new build is smaller than the houses in the examples I've given. Not looking good is it?! @boundarysponge I have specific reasons but interested to know did you base your assessment of "too high" on something or just saying it's not for you?

I wonder if there is some sort of "sensible" % ? Although it seems that this house wouldn't meet the threshold of a sensible % regardless but yeah, I do wonder if there is a way to work it out.

I think that houses are like cars, you pay a massive premium if you are the first owner and then the price drops and possibly doesn’t recover as well as in more established desirable areas for years.

if you want a “new build” get one but be the second owner otherwise you will be paying an extra that you will not get back if you sell the house after just a few years.

if the question is actually whether the price is right, that doesn’t depend on the house or the size but on its location.

New build it’s a new build. It’s all nice and new and clean and apart of lick of colour paint and light fixtures you don’t need to do anything.
Yes older houses a bigger but you likely will need few more pennies to do new bathroom or kitchen. I like new builds because they are new and make energy efficient. Unfortunately all new estates gor service chargers attached to them so that’s a bit off putting, from experience I know some are more expensive that others. So I guess you need to decide - new build and no additional work vs old build, potentially more space but might need expensive work done 🤷🏼‍♀️

You'd be mad.
The services charges alone...

Separately according to you

you can have a 3bed terrace or you can have a 4 bed detached and 90k
(With 90k you can do a lot to a house... 6m of building and youd have a high spec 4 bed detached with no service charge)

Note: im actually fairly pro new build.

I wouldn't buy a 3 bed new build purely for the fact that the 3rd bedroom is usually tiny! But, if you don't need 3 bedrooms it could be ok. I also wouldn't buy a terrace, too much potential for noisy neighbours, especially if I could get a detached for less.

Is this your forever home? If you're there for 25-30 years it probably doesn't matter, if you love it. However, if not, I'd be worried about going into negative equity.

Another consideration is the possible on-going differences in maintenance and cost of utilities. Should your new build be energy efficient vs old gas boiler needing replacement, new build just needs some interior decoration vs older house needs new roof/new kitchen/new bathroom etc.

It’s almost 8%… there’s not enough information in your post to know if that’s high but 10% is considered towards the higher end. You would want certain upgrades included (price always goes up with fittings), good infrastructure guarantees and a good resale potential for the future, otherwise it doesn’t look like a good deal.

@DecisionTime123 if this is going to be your forever home it's worth what it's worth to you. In the current housing market, particularly where there will be plenty more of the same available in a few years time, you do risk losing the new build premium at least if you are planning to sell on then. It's a gamble I wouldn't take atm.

I suppose you're paying the premium for (presumably) having the kitchen and bathroom/flooring/colours all to your taste without having had to do it all. Weigh up what that might cost to do gthe same in the other properties.

Thats if you had to change them in the other properties

The windows, elecgtrics and plumbing is all brand new, new boiler

Thats what you're paying for really, the premium of that, convenience, guarantees in place for breakdown etc

So the question is, is that worth it to you? Is it something that gives you peace of mind?

Personally it isnt worth it to me. I dont like those estates, they become clogged with cars and scruffy looking because cars have to park half on the pavement, they're often in the wrong place with no public transport, I dont like new build designs. I dont care about 'newness' and I dont like modern looking kitchens and bathrooms, I like country/shabby chic styles

I dont like all the ensuites and I dont like the overlooked gardens, I dont like open plan rooms.

But for people that like all that, they've got it there without having to extend, knock down walls, put in extra toilets.

Only you can decide what your preferences are.

In my neck of the woods there are a lots of incentives being offered, like stamp duty paid, fully carpeted, upgrades on kitchens and fittings. Feels like builders aren't selling as well as they'd like.
Those maintenance charges too because councils are refusing to adopt the green spaces, I can't help feeling like they are a problem longer term, rises aren't going to be capped and there's no escaping them.
I wouldn't want to pay any new build premium on an estate that is years from completion as it means that if I need to sell before it's finished I'm up against brand new houses and mine could look a bit expensive if I've not got a great deal.
So if take your comparables and negotiate if one of these new builds is really what you'd like.

When I had my new build house valued (had to for help to buy) they assumed a 10% new build premium on the original price.

So you do have to want to stay there for a few years to be sure you get your money back.

There’s a big new build area going up locally to us. Just be careful if you plan to sell within a few years. People who have lived there three to four years are trying to sell but competing against very similar but brand new houses and not getting g there money back.

Be very, very careful with service charges because that alone can devalue a property.

Who wants to pay to own their house when they can buy one without any charges?

That's a huge trap that many new properties come with and can be a major headache in the long run. Just spend 10 minutes googling this issue and you'll read some horror stories.

I very nearly got caught out in this trap but managed to swerve at the last minute. Those who had bought before me are trapped with rocketing fees and unable to sell.

this is exactly what I was worried about - in say 5 years they might still be selling new builds (as I am in stage 1 of the development) and I'll have a 5 year old house still with the new build premium.

Yes that's likley. If you think you will move in 5 years it will not be the best choice financially to buy a new build. You would loose much less buying a freehold (no service charges) and spending (less) money getting it how you like it. Also when it comes to sell time you have a much wider pool of potential buyers. Second hand property with extra attached endless maintainance fee's puts off significant numbers of movers.

It’s just the way it is when the house / houses are the first ones to be built on an estate, it’s like most shiny new products. The prices will drop after a certain amount of time, which means the owner of that first expensive house is screwed. More generally there is too much potential for going into negative equity and being stuck there for years which would put me off, never mind the “fleecehold” element of the charges (charges and council tax - no thanks).

From observations on the housing market, I get the impression new builds arent as popular as they once were (similarly to lease hold properties): maybe people are becoming increasingly aware of service charges. The market is terrible at the moment, so best to play it safe.

I live on a new build estate, it’s been here around four years, I moved in 18months ago. My room sizes are a decent sizes, no shoeboxes. A neighbour sold their house after less than a year and it’s went for £20k more than they paid for it even though the same house is still being built. They’re likely to break even with fees but all houses are selling for more than they bought for, this is even with there being four new build estates in close proximity.

I just pulled out of new build last month. Basically, my way of working it out was to look at projected property price growth over the next several years and see how long it would are for the houses in the area to “catch up” to the premium. In my case, it would take roughly 3-4 years for the prices to catch up which means the house prices would have been stagnant on my house for a considerable time. I know it’s a very rough benchmark but it helped to clarify my decision. I wasn’t even planning to sell really, but suddenly it no longer seemed worth it.

To people who ask why buy new build, it’s mostly for energy efficiency reasons. The cost of running one is considerably lower which is important in current climate.

How much is your service charge/ground maintenance per month?

I have had old builds and new builds. New builds are a win win for me. We are currently in one - that we hope to live in for the next 30 years and chosen with that in mind.