The pros and cons of new-builds

There are a huge number of decisions to be made when choosing a new home, from price to size to location, but perhaps one that is often overlooked is whether to go for a new-build house.

“Buying a new-build home is different to purchasing an existing property,” said consumer watchdog Which?, and there is a list of positives and negatives to consider.

1. Pro: help for first-time buyers

Opting for a new-build may be the only way many first-time buyers can get a foot on to the property ladder.

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The First Homes scheme, launched in 2021 to replace Help-to-Buy, offers first-time buyers a discount of at least 30% against the market value of a home – but only when purchasing a new-build – with larger discounts possible in London and the southeast of England.

Another option to help first-time buyers that only applies to new-builds is “shared ownership”, where you purchase a stake of as little as 25% of a property and pay rent on the remainder.

2. Con: ‘new-build premium’

The so-called “new-build premium” is a term used to describe how newly built homes tend to be pricier than older properties that are otherwise similar in size and location. This is because everything is new and unused, reflected in buyers often paying “tens of thousands extra”, said Which?, or as much as 30% more than older homes in the same area, according to Roarie Scarisbrick, partner at Property Vision, in the Evening Standard.

This also means new-builds lose value the day the first occupant moves in as the building, interior and appliances are no longer brand new. The Home Owners Alliance advises that “if you are buying a new-build, plan to live in it for the longer term”.

3. Pro: lower energy bills

Because new-builds must comply with the latest building regulations they are far more energy efficient than older properties. Newer homes often have “better insulation, may be double or triple glazed and also have the advantage of a more modern boiler, which can all help homeowners to save cash”, said The Independent.

Data from energy performance certificates (EPCs) shows over 80% of new homes have the highest A or B ratings, compared to just 2.2% of existing properties. With better EPC ratings, said the Home Owners Alliance, comes the option of green mortgages, which can offer cheaper rates.

4. Con: added charges

Many new-builds, especially flats, are serviced, with porterage, lifts and communal facilities that mean “high service charges”, said property expert Scarisbrick. These rarely, if ever, come down in price and can contain hidden costs that rise significantly over time.

It is therefore vital these are clearly set out in the conveyancer contract and are included in the overall cost of purchasing a new-build. Checking the length of the lease is also “crucial”, said Home Owners Alliance, and should be “at least 90-120 years and preferably 999 years”.

Another added cost is the potential need for a snagging survey when you purchase a new-build. According to Compare My Move, surveys have shown that 99% of new-build homeowners had to report snags or defects to their builder after moving in - 34% claimed that the number of problems detected was more than what they had originally expected to find. 30% of new build-owners found between 1-5 issues, whilst 26% found over 16 defects.

5. Pro: chain-free purchase

Being the first owner of a new-build means you will not have the issue of a chain of buyers above you. Sales often fall through due to no fault of the two parties directly involved but because someone further down the line is unable to complete their purchase. Not having this hanging over your sale “can take away one of the main stresses of buying a home”, wrote TV property guru Phil Spencer in the Daily Express.

It also removes the risk of being gazumped, said Property Road. “However, be aware that once you have agreed to buy a new-build, the developers will often set a deadline for when you need to complete by. This can add pressure if you need to sell your own property to fund the move.”

6. Con: mortgage complications

A major risk when purchasing a new-build home is that it will not be completed on time, or significantly delayed by unforeseen problems, as was the case during the pandemic.

Long delays could result in you having to pay “unexpected costs, such as for storage or more rent while you wait for your home to be finished”, said London Money. It warned that “if the delay is too long, you may also run the risk of your mortgage offer expiring”.

Delays in construction can also mean that “issues that weren’t flagged up in a survey suddenly rear their heads”, said House Beautiful. And while “any credible development firm will always provide after-sales care, it can vary dramatically”.