Huge new-build premiums may deter buy to let investors

A property investment platform’s research may throw cold water on the potential of new build properties to offer short term profits for investors.

Sourced Franchise analysed current new-build values, the premiums attached when compared to existing property prices and how this premium has changed over the course of the last 12 months. 

The research shows that, with the average British new-build now valued at £425,186, the premium commanded by new homes over broadly similar existing ones currently sits at 52 per cent. What’s more, this premium has increased by 20 per cent over the course of the last year alone. 

Regionally, the North East is home to the strongest new-build house price premiums, where new homes currently command £271,723 - 83 per cent more than the average home in the existing market. 

The current premium commanded by new-build properties also sits at more than 60 per cent across Scotland, the East Midlands, the North West, West Midlands and Wales.

At 17 per cent, London is home to the smallest new-build house price premium in the current market. 

At local authority level, it’s Harlow in Essex that ranks top, where the average new-build is currently worth 133 per cent more than the average existing home. Blaenau Gwent (127), Gravesham (120), West Dunbartonshire (119) and Preston (also 119 per cent) also rank within the top five strongest new-build markets at present. 

Not only do new-builds continue to command substantial premiums, but this has increased over the last year. 

In the North East, the average new-build house price premium has increased by 25 per cent over the last year, with the North West and Scotland also seeing similar rates of growth. 

Sourced Franchise Director, Chris Kirkwood, comments: “It’s fair to say that the residential market is stuck in a rut at present, with increasing interest rates causing many buyers to sit on the fence, causing a reduction in market activity, while house price growth has also stalled in recent months.

“However, the market is far from on its knees and new-build properties have not only continued to hold their own when it comes to the price premiums they command, but these premiums have also grown considerably over the last year. 

“This demonstrates that the appetite to deliver new homes to market remains strong which suggests that the nation’s housebuilders are unfazed by current market uncertainties and have a positive view of the long-term outlook for the market.”