Do New Builds Lose Value?

Buying a property is, for most people, the biggest investment of their lives, and there is always a lot to think about.

One of the biggest choices that you’ll have to make when buying a property is whether or not to buy a new build home.

In general, houses increase in value over the years, and at a time when house prices are at an all-time high and affordability is a struggle for many, return on investment is also a consideration. This concern is particularly common when it comes to new builds, as they have a reputation for actually losing value.

In this article, we’ll take a closer look at whether new builds lose value and what the various factors that impact this are.

What Is A New Build?

A new build is a property that has recently been constructed and has had no previous owners. Typically, these properties are built as part of a larger development by housing companies and they can include houses, apartments and townhouses. Usually, new builds come with modern designs, energy-efficient systems and the latest building regulations.

Many cities and towns across the country have new building developments going on, and as the government tries to meet its house-building targets it’s likely we’ll see more and more popping up in the future.

Despite their modern appeal, some buyers worry that new builds may not hold their value in the same way that older, established properties do.

Pros and Cons Of New Builds

Like with any investment, new build properties have a wide range of pros and cons.

Let’s take a look at these below:

Pros

Modern features: New builds usually come with the latest technology and energy-efficient systems that can help reduce energy costs and enhance comfort. Plus, everything comes new and never used before which is always a big benefit.
Warranty protection: All new builds should come with warranties that usually last 10 years. This can be a huge reassurance to buyers.
Low maintenance: As everything comes brand new, there is usually less to worry about in terms of repairs and maintenance.
Chain-free purchase: Since no one has lived in the property before, you don’t need to worry about being stuck in a chain that can delay the process.

Despite these benefits, there are also some cons to consider:

Cons

Premium pricing: New builds tend to be sold at a premium rate to existing properties due to the fact that everything is new. This means you’ll likely pay more than a similarly-sized older home in the same area.
Snagging issues: Newly built homes can have minor defects, known as ‘snags’. These small issues are sometimes still present even after you’ve moved in.
Uniformity: In large developments, properties can lack individuality making it harder to make it your own or for them to stand out when it comes time to sell.
Potential deprecation: New builds have a reputation for losing value quickly, especially if the market is flooded or the property is overpriced upon purchase.

Do New Builds Lose Value?

Yes, statistics show that new builds can lose up to 7% of their value over the first few years after purchase. The drop is more likely in the immediate years after purchase as the property will no longer be new.

While it is common for new builds to lose value, it’s worth noting that this is not always the case. There are a number of factors that influence whether or not value will depreciate, and we’ll explore these in the section below.

How Do New Builds Lose Value?

There are a wide range of ways that new build properties lose their value.

Let’s take a closer look at some of the main reasons why this happens:

Initial premium: Most new build buyers will pay a premium for these properties. This is because everything is brand new, making the price inflated. But, as soon as you move in, the property is now ‘used’ and this premium is instantly lost from its value.
Market conditions: The housing market in the UK is not in the best condition. While this can sometimes favour sellers, large developments in the same areas can flood the market which drives down prices.
Quality issues: Unresolved snagging issues or poorly constructed new properties can negatively impact resales. If a certain development has gained a reputation for structural issues, its value can be seriously harmed.
Lack of character: Many buyers prefer the charm and uniqueness of older homes, and this makes the uniformity of new builds less attractive to some. Most new builds come with standardised designs, making them feel less generic and attractive.
Location: If the area itself doesn’t boost the value of the property, it can be tricky. Sometimes, property prices in new build areas can stagnate or even decrease.

How To Future Proof A New Build?

To ensure your new build retains as much of its value as possible, there are a few futureproofing steps you can do:

Choose The Location Wisely

Location is always one of the most critical factors. Research the area thoroughly beforehand as schools, transport links and amenities should all appeal to future buyers. Also, check if the area has any long-term development plans as further building work can also impact investment.

Conduct Snagging Inspections

Make sure you hire a property to inspect the property for any ‘snags’ (minor defects that haven’t been fixed). Make sure all snags are rectified before you move in as unresolved issues can impact resale value in the future.

Research The Developer

A reputable developer with a history of high-quality builds is crucial. Read reviews, check financial stability and speak to people who have previously bought from them if possible. If the developer is known to have a bad reputation, it can impact the property value.

Ensure A Valid Home Warranty

Make sure your property comes with a legitimate 10-year warranty. This offers protection against structural issues and will reassure future buyers. While they should come as standard, the absence of one will impact the value.