Thinking of buying a property? We take a look at how price growth has varied by property type during the past year.
New build property prices are increasing at more than 10 times the rate as those for existing housing stock.
The typical cost of a new build home in England is rising at an annual rate of 4.3%, while property values for existing homes have edged ahead by just 0.3%, according to the latest figures from the Land Registry.
The trend is seen across all regions of England, with the average new build property costing £316,789, compared with £245,173 for other homes.
In many parts of the country property values for the two different property types are moving in opposite directions.
While house prices have fallen year-on-year for existing housing stock in London, the south east, the north east and the east of England, the cost of a new build home has jumped by as much as 3.6%.
Why is this happening?
A number of different factors could be driving this trend.
On the one hand, comparing new build properties with existing homes is not necessarily comparing like with like.
For example, new build homes may be larger, finished to a higher specification or have access to more amenities, such as swimming pools, gyms and even concierge services, than their existing counterparts.
All of these factors will leader to higher asking prices for new build homes.
At the same time, the shortage of existing properties that are being put up for sale could be driving more people to look to buy a new build property. The resulting spike in demand will have a corresponding impact on prices for these homes.
But it is also possible that the difference in price growth between the two property types could be caused by the Government’s Help to Buy equity loan scheme.
The initiative enables people to purchase a property with just a 5% deposit with the Government topping this up with a 20% equity loan that is interest-free for the first five years.
But the scheme is only available to people buying a new build property and research has suggested first-time buyers paid a premium of up to 22% on the price of their property to use Help to Buy, compared with those who took their first step on the property ladder without using the scheme.
Who does it affect?
The fact that house price growth for new build homes is significantly outstripping that for existing ones is bad news for everyone except property developers.
People who buy a new build home will not benefit from these gains, as when they come to sell it, their home will be classed as existing housing.
At the same time, the strong gains seen for new builds relative to other homes may start pricing potential buyers out of the new build market.
This situation would be particularly bad news for first-time buyers who may be relying on using the Help to Buy equity loan scheme to get on to the property ladder.
What’s the background?
The relatively strong gains in new build house prices come against the background of a very subdued property market.
The latest survey from the Royal Institution of Chartered Surveyors showed that new buyer enquiries, agreed sales and the number of homes coming on to the market all continued to decline in October.
Simon Rubinsohn, RICS chief economist, said: “The latest survey feedback continues to suggest that both buyer and seller activity remains in a holding pattern, hampered by political and economic uncertainty.
“Given the upcoming general election next month, it appears unlikely that these trends will pick-up to any meaningful extent over the remainder of this year.”
By contrast, demand in the lettings market rose to its highest level since the end of 2016, as more people looked to rent a home than buy one.
At the same time, the number of new homes available to tenants continued to decline, putting further upward pressure on rents.
Top 3 takeaways
- New build property prices are increasing at more than 10 times the rate as those for existing housing stock
- The typical cost of a new build home in England is rising at an annual rate of 4.3%, while property values for existing homes have edged ahead by just 0.3%
- The trend has left the average new build property costing £316,789, compared with £245,173 for other homes