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Investing in new-build and off-plan property in the UK

To make a success of investing in new-build and off-plan property, there are certain things you will need to take into consideration as an expat. This article breaks down some of the pros and cons of new-build home investment to help you understand the most important factors, whilst trying to avoid any costly errors.

Written by Lauren Ross on 12 November 2020

Due to an increasing demand for new-build properties, over 240,000 new-build properties were completed in 2019.

Millions are investing into new-builds and off-plan properties, some for the benefit of being able to design your own layout of fixtures in your home (right down to every last plug socket), and some for the ever increasing popularity for renters and purchasing for buy-to-let purposes.

But buying new and off-plan properties come with an array of pros and cons. Below are some of the most prominent factors and why they matter for your investment.

Pros and cons of investing in new-build and off-plan UK property

Design/ ‘Finishing Touches’

As mentioned above, an attractive feature of purchasing new-build property (depending on what stage of the build the particular property is at) is being able to sit down with someone and go through the plans of the build room by room, choosing things like colours, worktops, electrical socket placings, television satellite points, flooring, lighting… the list goes on!

The same benefits apply with off-plan, sometimes even more so due to the process of construction not yet started. If you are a Buy-To-Let investor, although volume developers provide restrictions to major structural changes, aesthetic changes are easy to incorporate.

They can also offer some nice specification choices and upgrades if you did wish to differentiate your property, allowing you to make sure that it suits its intended need (whether for your own personal use when not occupied, or for a specific adapted requirement to be able to offer and charge a higher price PCM when its finished).

The main downfall to this is the price tag. When buying a new-build property, you are effectively buying a ‘shell’. Albeit some of the fixtures and choices will have ‘standard’ ranges (which will not cost you any extra), the majority of add-ons, lighting, electricals and so on are charged at usually quite a high price.

This however is counteracted by most of the large home-build development companies offering a range of generous ‘incentives’ and packages. This is to encourage either your reservation of a home/plot (usually that they need a quick sale on), or the purchase of some kind of furnishing/flooring package.

No chain when purchasing

To some, if not most, this may be the most attractive element of buying new and off-plan properties. The difficulties that arise when purchasing a property that have a chain (even if just one link) can feel endless and extend the process of completing on your sale by several months.

When buying new-builds, the risk of being slowed down by multiple chain links does not exist, so instead of waiting on others to exchange/ receive mortgage offers/ pack and vacate, the only thing you have to wait for would be the completion of the build-progress (which is usually out of your control anyway due to unforeseeable variables).

Safety, Security and Efficiency

With all new-builds now coming with a 10-year warranty as standard, you know that your investment is protected by any structural issues that arise within the first ten years after purchase. This is definitely a great aspect to consider when planning to invest in a new-build home and not something you would ever achieve buying a house that is pre-owned.

In regards to safety, new properties offer a much more certain assurance. Large home-build companies must adhere to all of the most up-to-date safety legislation, which include things like wide-open windows, carbon monoxide/fire alarms, British Standard lock fitting and fire-resistant materials. These factors are ultimately your friend when applying for home insurance as well.

The list of benefits for energy efficiency in new-build properties is lengthy. Over 80% of new-build properties have an A or B ‘energy efficiency’ rating, while also having a much smaller carbon footprint.

Financial Perks

For buying off plan, there is a significant financial benefit of negotiating a great price for today’s market with what most would call a very attractive payment schedule (e.g. with Barratt London, you would pay 10% upon exchange, to then pay the remainder only on completion… which could be 1-2 years down the line!) Therefore, as long as you are receiving the best information on elements such as location and build, you can be sure that you will be enjoying good capital appreciation right from day one of becoming the legal owner of your property.

Timing and Planning

The biggest issue that investors can face with off-plan/new-build property is build progress and delays in completion.

Whether its extreme weather conditions or… a global pandemic, delays will mostly always occur for some reason. With large new-build companies, a window of usually around a 3-month time scale is given for an ‘estimated completion’ of your home, and at 2 specific times of the year e.g. ‘November/December/January completion’ or ‘May/June/July completion’.

It is most often not until around the month before that you will be notified of a move-in/key collection date, which can be extremely impractical for investors that want to move in tenants at the earliest opportunity to start turning a profit.

The same can also apply with off-plan property with an outside building contractor, but worse. This is due to being an independent company that is not nationwide, that typically does not have to meet specific deadlines and quotas. Independent contractors that are hired to build your off-plan property would most often need more close monitoring in order to make sure that things stay on time and as planned.

Request a free introduction to a UK property investment specialist

Our UK property specialists will conduct a free introductory consultation to be able to understand more about your situation, offer high quality guidance on all of your options, provide you with details of potentially suitable investment opportunities within the UK and explain the purchase process to help you make the next steps with your investment.

Request a free introduction to an UK property investment specialist that will:

  • Conduct a free introductory consultation to understand more about your situation and offer high-level guidance of your options
  • Provide you with details of potentially suitable investment opportunities around the UK
  • Explain the purchase process and help you make the next steps