A study by the Home Builders Federation (HBF) has found the cost of upgrading an older property to the same standard of a new-build could be as much as £50,000! Therefore, on top of the initial property purchase, the overall cost may exceed what you’d pay for a new-build in itself.
With this in mind, investors should consider purchasing a new-build outright, especially if the location is desirable and there’s potential for long term capital gains.
The Home Builders Federation survey looked at refurbishment work that is often required when people move into a new home. Estimates of these potential costs are listed below, although some prices may of course differ depending on the size of the property:
- Fitted kitchen – £7,900
- House re-wiring – £8,850
- New bathroom – £3,800
- New central heating system – £6,185
- Roofing – £4,000
- Doors and windows – £4,900
- Guttering and insulation – £1,000
- Utility appliances and electrical equipment – £1,000
If looking to refurbish, one should really take these potential costs into consideration. If they begin to add up significantly, then it’ll make more financial sense to invest in a new-build. Add to this the energy savings you’re also likely to make. Plus the added bonus of having a new-build warranty, which is usually set at 10 years.
Buyers are often drawn to new-build homes because of their increased energy efficiency. Compared with Victorian-style properties, they could be up to 65% more effective in preserving heat due to fitted airtight doors, insulated roofs and double-glazing.
The HBF study shows that 94% of homes built in 2016/2017 can boast an A-C energy efficiency rating – this is just a quarter in second-hand properties. New-build homeowners will therefore save hundreds, and sometimes thousands, of pounds in utility bills alone each year.
Some older buildings in the UK may simply not meet the standards required for 21st century living. Remodelling them completely may take up too much time and money for it to be considered financially viable. Usually something done out of a labour of love rather than investment purposes.
On the other hand, new-builds are always constructed to modern standards and have to pass multiple council planning, build, and health and safety requirements. They’ll be equipped with energy-efficient boilers and vacuum insulation panels, not just saving you money on bills, but also meaning replacements won’t be needed any time soon.
You’re also likely to experience long-term capital appreciation as new-builds are often hand picked in areas with high social and economic growth potential.Some buyers may not be aware that new-builds are zero rated from VAT. As the buyer, these savings will be passed onto you, helping reduce your overall costs. As briefly mentioned before, fittings in a new property are covered by a 10-year NHBC warranty protection on structural defects. So if anything does go wrong, you won’t have to worry about footing the bill.
Deciding between a large-scale renovation or a new-build property depends on the property itself, as well as your personal circumstances and goals. However, as refurbishment can cost as much as £50,000 as noted in the Home Builders Federation study, it would make more financial sense to plump for a new-build instead.
If you’re looking for ideas on where you should buy your investment property, take a look at The UK’s Top Buy-To-Let Hotspots in 2017 Revealed!
For more advice and information on where you can invest in property, get in touch for a chat.