According to the National House Building Council (NHBC), more than 26,142 new homes were registered to be built in the South East last year, on par with 2016 levels of 26,147 dwellings. Great news when you consider it is one of the highest number of new builds in the region since the pre-recession levels of the Credit Crunch and the uncertainty of Brexit and the General Election.
So, when a landlord recently asked me why the brand-new property she was considering buying was a lot more expensive compared to a second-hand/existing property of similar type, accommodation, location and structure I thought this would make a fascinating topic to do some homework on…..homework I want to share with the homeowners and landlords of Bicester.
You might believe that the difference between purchasing a new build home against purchasing a second-hand/existing home is just individual preference. Some buyers/tenants like the trendy modern feel of a new home, whilst others like a home that has stood the test of time.
So, what is the right answer? Well, I am going to be looking at some statistics that shows there is a real difference in the Bicester and Cherwell District Council area’s property market when it comes to new vs existing homes and the price paid. Looking at the average price paid for existing (second-hand) versus a brand new home since 1996, one can see from the graph it makes interesting reading.
On this second graph, one can see the percentage difference in average price paid between new and existing…
Yet possibly nothing is ever that easy, as there are issues with these statistics.
A ‘new build premium’ is the additional price a buyer pays for buying a new property compared to a second-hand one. The overall average for the whole Cherwell District Council area for the ‘new build premium’ over the last 21 years has been 15.5%. These statistics actually show that it is problematic to compare like with like because it is impossible to completely separate all the different factors of type, accommodation, location and structure etc.
One would have to have a mirror image second-hand Bicester home and a duplicate new build right next door to each other, then calculate out which Bicester house buyers or Bicester buy to let landlords would pay more for? Perhaps if everything was the same (all things being equal), there might not be any difference in what buyers would be prepared to pay… but then again, it’s like new cars versus cars that have a few hundred miles on the clock …..there is always a difference on the forecourt, because things are never wholly equal.
What I do know is that my statistics of the Bicester property market show that new build Bicester apartments are worth more to people than their second-hand equivalents, whilst the difference is negligible between new build Bicester detached houses and second-hand Bicester detached houses.
However, I believe the really important lesson in all these statistics is the fact that the ‘new build premium’ versus buying a second-hand property increases in a buoyant market and reduces in a tougher market. So, if you want to buy new and do not want to pay a premium.… you’ll need to wait for a tougher, more challenging property market.