The six-figure price gulf between new and resale property, and between privately built and former council homes, is revealed in a new study focusing on London.
Research comparing the cost of one-bedroom flats in every borough shows pre-owned homes cost an average £542,715, while a new-build one-bedroom flat costs an average £679,671. That’s 22 per cent — or almost £137,000 — more.
An ex-council one-bedroom flat is the best value of all at £396,317 on average, the Hamptons International study shows. This is more than £146,000 — or 31 per cent — less than buying a privately built flat, and more than £283,000, or 52 per cent, cheaper than a new-build flat.
New build is always the premium buy, for the peace of mind that comes with a modern, well-insulated home, often with such extras as communal gardens and sports facilities. In today’s tricky market some developers are offering good deals such as paying buyers’ stamp duty to stimulate sales, but the property will always come out more expensive with annual service charges on top.
Not long ago you could have said a new-build flat, bought off-plan, would make you a profit by the time you moved in. The direction of the current market is anybody’s guess because of stamp duty hikes and fallout from the Brexit vote.
Adrian Plant, director and head of new homes at estate agents Currell, says: “With new build you hope you know that for the first 10 years there will not be any major costs. You won’t need to pay for builders and plumbers, and many developments now come with a concierge to handle maintenance and sort out issues like arranging for parcel delivery or laundry, at a cost in service charges.”
Buyers of older homes pay less to purchase, but often then stump up for renovations and/or extensions. Of course, an older home may bring the bonus of period features such as cornicing, wide staircases, stained glass and Victorian tiled floors.
WITH GREAT VALUE COMES GREATER RISK
Ex-local authority homes are fantastic value but this is the most risky sector to buy into. Generally, those built before the Sixties and Seventies are higher quality and larger than a more modern home. But on estates blighted by years of underinvestment, flats can be shabby, common areas depressing and getting a mortgage can be a pain.
However, Stephen Lovelady, sales manager at Foxtons’ Pimlico and Westminster branch, says ex-council homes on his patch are often well built, with good security and sometimes well managed. He says most lenders will offer mortgages on ex-local authority homes in central London, although some will not lend on buildings above six storeys, or of poor construction standards.
Beyond Zone 1, broadly speaking, lenders are happy with ex-council homes in desirable areas and less keen on run-down locations. Buyers must research whether there are any major repairs planned for the block or estate because they, unlike the council tenants, will have to pay a share of the cost. Request a work plan from the local council which will give a five-year list of any projects plus an estimated cost. Your solicitor should investigate any major works when conveyancing your sale.
Communal halls, lifts and walkways are often grim. Bad management, crime, drugs and gangs of teenagers making life a misery are all possibilities on a big estate. A safer bet is a small, low-rise block that’s well integrated into local streets, although this might be more expensive than average.
So before you buy, contact the tenants and residents association to discuss any major problems, knock on doors and chat to residents, talk to the local paper, study police crime statistics and visit the flat during the day and at night.