Should you buy a new build home?
Question I’m looking to buy my first home and considering a new-build but given all the negative news about certain developments, should I just avoid them to be on the safe side?
Paula Higgins, chief executive of the Home Owners Alliance look at some of the advantages of new builds but also what to watch out for.
It’s not surprising that you’re reluctant to buy a new build given the deluge of news stories in recent months. Almost weekly we’re seeing horror stories of shoddy workmanship, homeowners moving into properties that are not fit for purpose and buyers finding out they don’t actually own their home, months after completing!
It’s certainly not been a good few years for the new build sector. But that doesn’t mean you should avoid buying a brand new house altogether – just that you need to do your research and go forward with all the facts.
Advantages of new build
Firstly, there’s the convenience of buying something brand new. When you buy a new build, you’re essentially buying a blank canvas, meaning you won’t have to start any renovation or decorating work when you move in. You could even have a say in the design of your property, depending on where the development is up to when you come to buy.
And, of course, you won’t have to deal with a property chain – which often holds up the whole process. You may also be able to bag a few freebies as many developers will offer incentives to encourage you to buy – from covering your stamp duty to even paying for some of your furniture. (Needless to say, you should never buy a property just because you’re being offered something for free!)
What’s more, it’s likely that the property will be much more energy efficient than an older home because new build homes have to comply with the latest building regulations. This means they are far more energy efficient than older properties. Data from Energy Performance Certificates shows over 80% of new homes have the highest A or B ratings. That compares to just 2.2% of existing properties.
And it’s worth noting that if you’re looking for help to get on the property ladder and are considering accessing Help to Buy, this scheme only applies to new build properties.
With all that said, there are some pitfalls you’ll need to be aware of.
Tenure is a topical issue at the moment. It’s always preferable to buy a freehold rather than leasehold property. But most new build flats are sold as leasehold rather than freehold. Tread carefully and make sure your conveyancer explains costs, charges and restrictions set out in the lease.
While leasehold as a form of tenure is very common and makes sense for flats, you should avoid leasehold houses. The government has now proposed a ban on the sale of stand-alone new build houses as leasehold, but as there’s no date as yet for when this ban will come into place, it’s certainly one to watch. Remember, a new build house should be sold as freehold. Quality is another big issue for many new build buyers, with some homeowners finding countless and often significant faults once they’ve moved in. Research your developer and see if they’ve made it into the press for poor quality. Our guide How to choose a new build developer may help.
And a snagging survey is another good option as soon as the developer lets you into the property [ideally before completion as you’ll be in a stronger position]. A professional will know exactly what to look for and will be able to point out any faults so that you can have the builders put them right. You should also be prepared for delays if you opt for a new build. Your ‘completion’ date may change several times as the build falls behind schedule. While any delays are annoying, if they’re significant they can have serious financial implications, in particular when it comes to your mortgage offer which could expire before the property is ready.
Ask your conveyancing lawyer to include a “long stop” date in your purchase contract – this is the point at which you can walk away if the property hasn’t been completed and make sure that it allows you to get your deposit and any costs incurred back too. And finally, a new build will depreciate in value as soon as you buy it since it’s no longer brand new. So our advice would be to plan to live in your new build for a good few years. Ideas of flipping it for a profit, rather than seeing it as a home to live in, may backfire.
Article taken from What Mortgage Magazine Online Posted on September 10, 2018