Property: It's brand new, but is it necessarily better?
Developers offer a variety of temptations to be the first owner of a newly-built home, but you will often pay a premium price. Assess each deal on its merits, says Robert Liebman
Saturday 13 June 1998
New homes vary considerably in quality and value according to the developer, contractor, incentives and various market forces.
By definition, they boast the latest technology and, whether in 1998 or 1978, by and large they mean less maintenance and making good the mistakes and omissions of previous owners. But the best of today's new builds go beyond technological advances to satisfy owners to a degree that is probably unprecedented. Appliances will not only be new but are likely to be built in. Most homeowners will be able to select in advance things such as the colour and quality of carpets and tiles, and the placement of some interior walls.
Whether urban or suburban, new homes offer high levels of security, which also means that roads on new estates are planned to be safer for children, according to Colin Gabb, managing director of Bryant Homes South.
Developers didn't always listen so attentively to customers. Why the change? "The first day of the last recession forced developers to rethink their product, to give value for money," says Paul Vallone, sales and marketing director for Berkeley. To meet customer expectations, builders such as Laing and Bryant imported ideas from elsewhere, notably America.
The Yankee influence is immediately evident in Laing homes in Cuffley, Hertfordshire, which boast enormous basement rooms. Laing, Bryant and a few other developers also build "bonus rooms" - rooms in the loft space. Such refinements increase the property's value for developer and homeowner alike.
But already poor-quality conversions and waterside properties have appeared, built by developers out to make a quick trendy buck. "By and large new houses have pinched rooms, smaller and lower than older properties. They are not built very well," says Malcolm Hollis, a chartered surveyor who advised Granada TV on the recent Builders from Hell programme.
A builder can be merely unscrupulous rather than downright diabolical to cause misery. Five years after Helen and James bought their new home on an estate in the North, Helen is still annoyed that they can't extend the garage and build a bedroom over the extension. "Our surveyor found that the houses were too near one another and our builder had laid the pipes too near the surface. We wasted pounds 600 on plans and a survey."
This builder was conserving space. Many contractors indulge in what Mr Hollis calls "spec-saving" - using cheaper, inferior products than were agreed on.
Some new cars are lemons, and all new cars plummet in value the moment they leave the showroom. Similarly with homes, but owners of new properties have the extra worry that, if you are on an estate where other homes are still being built, your short-term value drops even further.
When the dust literally settles, your one-careful-owner home enters the lists like any other second-hand property. "Once you've lived in it, then obviously for the next buyer it's no longer new, but the fundamental point is that its price will still be rising. The depreciation depends on local conditions and is likely to be overwhelmed by the fact that prices are rising in any case," says Paul Sanderson, Nationwide's head of research.
According to Halifax statistics, prices for existing homes have steadily inched up over the last year, whereas average prices for new houses were all over the place. In May 1997 they declined 2 per cent, but last May they rose 11.7 per cent. This seemingly magnificent leap is meaningless. The monthly statistical sample for new homes in particular is small, volatile and unreliable.
"The normal pattern is for new houses to be between 5 and 15 per cent above the price for existing houses," says Gary Marsh, head of group corporate affairs for Halifax. "When times are problematical, builders cut their prices to get the cash flow going. The gap now is very narrow, so over the next year or two expect new house prices to rise by slightly more than existing houses to restore those more normal differentials."
What does this mean for someone today choosing between two hypothetically equal houses - one new, one second-hand - and wondering about the prices each might command five or fifteen years from now?
"I honestly don't think you could say that one would be better than the other. The movement in percentages would be so close as to be indistinguishable," Mr Marsh concludes.
Nationwide's Mr Sanderson concurs: "More important than the statistics are the specifics for any particular housebuyer, the local factors, such as the actual position of new developments, and the schools, roads and shops. Many of these factors determine the price performance of any one area.
"Quite often the differences between areas in the same region can be greater than between two regions. Local conditions really dominate," he adds.
From another quarter, Richard Cotton emphasises differences between developers who build to different qualities. "We can identify who we would, and who we would not, buy from," he says. Mr Cotton is a partner at Cluttons Daniel Smith in charge of their London residential agency.
Ordinary buyers can also decide who to buy from. Mr Hollis says: "If I were buying a new home, I would ask others already on the estate about their homes. If I were the first, I would spend whatever was required on surveys and inspections to obtain reliable information."
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