New builds can hold and acquire value, making them the perfect next move for first time buyers or existing homeowners. Their value retention can depend on factors like quality of construction, property size and location.
In this article, we will break down everything you need to know about new builds and how they hold their value.
In this article, we will break down everything you need to know about new builds and how they hold their value.
What does value retention mean in the property market?
Value retention in the property market is the ability of a home to hold its value over time. There are several factors which impact this. Area and location, as well as property size and general market conditions, can all affect a property’s value, meaning price can increase or decrease over time.
Do new builds lose value?
New builds do not generally lose value. Initially, you are likely to see depreciation, but over time, new builds often rise in value. They can be more energy efficient and compliant with building regulations, adding to their value.
The ‘new build premium’ and initial depreciation effect
A new build may cost more to buy than an older home. The ‘new build premium’ is an added amount buyers pay for a new build. This is usually due to the modern features in newer homes that older properties lack. This may be a nicer kitchen or an improved, spacious layout.
As the ‘newness’ of a new build wears off, the property can depreciate initially. However, the modern features and reduced maintenance of new builds mean that they often grow in value over time.
Do new builds go up in value?
New builds can go up in value over the years. The ‘new build premium’ may mean that a home’s value drops initially, but new builds tend to hold or increase in value. This is dependent on initial aspects such as property size and quality of construction. External factors such as location and housing market changes can also impact value.
How resale value is measured
A resale home is an older property that has been previously owned. When new build owners come to sell their home, their property will be classed as resale. Resale value in the property market is measured by comparing similar recently sold homes with a house about to go on the market. Factors that influence resale price can range from location to property size and fluctuations in buyer preferences.
Key factors that influence whether a new build holds value
Several factors impact a new build’s ability to hold value. From property size to energy efficiency, these are the aspects that will influence a new build’s value.
Property size
The number of bedrooms, garden size and overall square footage can impact the value of a new build. Potential opportunities for property extensions or loft conversions can also help homes to hold their value.
Location and amenities
Location can add or take away value from a new build. Neighbourhoods with better amenities, strong transport links and good schools can add value. New builds in areas with higher crime rates, known to flood regularly or next to busy main roads can take away value. Regeneration in previously run-down areas can see property prices rise.
Quality of construction, materials, and developer reputation
Buyers trust reputable developers and the materials they use, which contributes to value retention. New builds made with quality materials generally need fewer repairs compared to older homes, helping them to hold their value over time. Signs of damage, like mould or damp, can negatively impact the value of older homes.
Energy efficiency, modern features & building regulations
New builds are designed with building regulation compliance in mind, while older homes may need costly changes to meet these standards. Thanks to government initiatives like the Future Homes Standard, new builds will have improved features. This includes better energy efficiency under Part L and improved ventilation under Part F, helping new builds to retain their value long-term.
Leasehold vs freehold status, maintenance and service charges
Leasehold properties are owned for a fixed time. They may be more affordable initially, but are less likely to hold their value. A leasehold with a shorter term can devalue the property.
Freehold properties usually hold their value better than leasehold properties.
For more information, check out our article that covers the differences between leasehold and freehold properties.
Market conditions
When supply is high and demand is low, this can devalue properties on the market, as lots of homes and not enough buyers drive prices down. Changes to interest rates can also impact value. Higher interest rates make properties less attractive to home buyers, which can decrease house prices.
What the data says
Buying a new build can be more expensive than an older home. According to the UK House Price Index, the average cost of a new build is £380,000, compared to £283,000 for older homes.
However, there are several local authorities across the UK where it is cheaper to buy a new build than a resale home. According to Zoopla, Winchester offers the best new build value, with new homes costing an average of 22% less than a resale property.
How to maximise value retention when buying new
Existing and first time buyers can maximise the value retention of new builds. Choosing the right developer or adding property upgrades can hold or increase the value.
Choose the right developer
Researching your developer helps to protect you and the value of your potential new home. Reputable developers will use skilled tradespeople and quality products, contributing to fewer issues in years to come. Improved design and layout can add value, which is impacted by the developer’s choices.
Pick the best location with future regeneration plans
Location is a major factor in value retention. Make sure to research where you are buying your new build and if there are plans to regenerate the area. Improved public areas and new green spaces are signs of regeneration.
Maintaining and upgrading the property
New builds will often already have kerb appeal. With added property maintenance and upgrades, you can help your new build retain value. Adding extensions, loft conversions or smart home technology can boost a new build’s value.
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