House prices for new build homes are nearly 30% higher than existing properties in England as developers ignore wider pricing trends.
Data from the Land Registry for property transactions shows buyers of new builds pay a premium of 29.2% or £71,616 over the average price for existing homes in England.
New build homes have also increased in value by 4.3% year-on-year which is 14 times more than existing homes rising by 0.3%.
Property developers are ignoring the wider pricing trends where house prices up by 1.0% in England with average prices for new build homes at £316,789 compared to existing at £245,173.
The high premium paid for new builds means first time buyers and home movers may find better value purchasing an existing property which would be more affordable.
Lower premium paid in London
In London the average new build home costs £505,255 compared to £478,564 for an existing home or a premium of £26,691, suggesting other features would be more important when buying than price.
The following table from the Land Registry shows the average premium paid and annual rise in house prices for a new build compared to an existing home to July 2019.
| Region | Premium | New build |
Existing |
|---|---|---|---|
| East of England | £87,244 | 3.6% | -0.4% |
| West Midlands | £80,988 | 4.7% | 0.9% |
| East Midlands | £80,978 | 5.4% | 1.3% |
| England | £71,616 | 4.3% | 0.3% |
| South East | £70,034 | 3.1% | -1.2% |
| North East | £69,265 | 3.5% | -1.1% |
| North West | £67,508 | 6.8% | 2.1% |
| South West | £60,016 | 5.5% | 0.5% |
| Yorkshire and Humber | £51,776 | 5.8% | 1.8% |
| London | £26,691 | -1.2% | -1.2% |
The highest premium is £87,244 for properties in East of England with average property values of £375,371 with West and East Midlands with premiums at over £80,000.
Existing house prices have fallen in the South East and London by -1.2%, the North East by -1.1% and East of England by -0.4% whereas new build prices are up 4.3% year-on-year.
Premiums on new builds may result in higher house prices of adjacent existing homes giving remortgage buyers an opportunity to release capital which they can use to improve their home.
Buy-to-let investors may avoid new builds and purchase cheaper existing properties to help improve rental yields.
Strong demand for new build homes
There may be advantages for buying a new build home and people are willing to pay a premium for more internal space or properties finished to a higher specification.
For luxury apartments in London many offer combinations of extra bathrooms, comfort cooling, expensive fittings, terrace garden, concierge desk, swimming pools, gyms and residence lounge.
Demand is strong for new builds possibly in part to the lack of existing properties on the market as the Royal Institution of Chartered Surveyors (Rics) reports new instructions to sell falling to its lowest reading since June 2016.
The declining numbers of new listings coming to the market is inline with falling levels of agreed sales with activity lower in virtually all parts of the UK.
There may be fewer suitable homes on the market as the equity release mortgage buyer can avoid downsizing and access cash from their home to repay an interest only mortgage or purchase a new car.
The government’s Help to Buy scheme may be driving demand as it is only available on new build homes requiring only a 5% deposit and a 20% equity loan interest free for five years.
What are your next steps?
Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or a buy-to-let investor.
Learn more by using the property value tracker chart, mortgage costs calculator and equity release calculator. Start with a free mortgage quote or call us and we can take your details.
For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property for home improvements, holidays or even buy a more expensive home.
