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What to look out for when buying a new-build home

Read this to learn about risks and potential pitfalls of new-build properties 24 September 2021 by Casper Arboll

So, you’ve decided to buy a new-build home? Whether you are a first-time buyer or an experienced mover, there are many benefits and potential pitfalls to be aware of when purchasing a newly built property.

Despite the pandemic leading to the temporary closure of the housebuilding sector, 148,630 new homes were completed in 2020 and demand for these properties has been fuelled by a real variety of reasons, including the Government’s Stamp Duty holiday and a national ‘race for space’ which emerged as many people sought to secure additional outdoor and home working space in the wake of the UK’s multiple lockdowns. These factors, along with returning interest from international property buyers and property investors helped to create a housing boom in 2021.

New-build homes are a popular option for many reasons and provide some benefits that simply aren’t available from pre-owned homes. These properties are appealing as they require minimal decoration and often come with new build guarantees. In addition, a new-build home is a blank canvas, with fresh tiling and paintwork for buyers to enjoy immediately after moving in, and energy costs are typically lower. Many buyers also like being the first owners of a property.

 

Consider these drawbacks

However, there are naturally also drawbacks to consider. The so-called new-build premium means that in some cases buyers can end up paying more for a newly built home than they would for an equivalent older property. Much like buying a new car, there’s also the possibility of the price of a new home falling after purchase. This ‘forecourt’ premium can therefore make it difficult for some homebuyers to get their money back if they try and sell within a couple of years of moving in. However, property prices are inherently linked to and dependant on demand. With both new builds and older properties, their value is dictated by wider market conditions and can go up as well as down.

After you’ve visited your plot and the site’s show home, many new-build developers will also let you specify certain finishings within the build – such as flooring, tiles, and kitchen cabinets etc. While customisation options are appealing, the more upgrades or bespoke fittings you opt for, the longer you may have to wait. With this increased risk of delays with an “off-plan” home, many buyers agree on a long-stop completion date with the house builder. This is where the developer agrees to pay compensation if the construction is delayed beyond a certain date.

 

What else should buyers look out for?

There are several other areas buyers should keep a close eye on when purchasing a new-build home. These properties typically come with a warranty, but this will usually only cover building defects and structural issues. With new-builds, you can expect snags like unfinished carpets or a missing door hinge, so be prepared to have a snagging survey as soon as the developer allows you on site.

Prospective buyers should also ensure they know whether their property is freehold or leasehold. With the latter, the owner usually pays an annual ground rent to the freeholder. Leases can be as long as 990 years but are typically between 100 and 125. Homeowners can struggle to obtain a mortgage if the lease has less than 70 years left to run. However, there have been proposed changes as Government pledges to end leaseholders’ ground rent payments to their freeholders.

If you are a leaseholder, the freeholder may attach certain conditions to your property, such as requiring that no alterations are made to the property without prior consent. However, leaseholders are fully responsible for any maintenance and building insurance costs. New-build houses should not be sold on a freehold basis, but most homes in flats are sold in this way.