The latest research from Warwick Estates examines the ongoing costs that new-build owners are often required to cover after the property purchase has been complete, from well-known leasehold fees to some more unexpected financial extras that most buyers aren’t aware of.
There are numerous financial savings to be made by purchasing a new-build home instead of an existing property, including significantly reduced energy bills and renovation expenses, but new-build homes do tend to come with additional expenses that existing homes might not.
First of all, there is the new-build premium. On average, a new-build home in the UK costs £358,543 while the average price for an existing home is £260,629. This marks a new-build premium of 37.6%, just under £98,000.
Many of the UK’s new-build homes are flats and are, therefore, leasehold properties rather than freehold. This means that owners are required to pay for the ongoing costs associated with leaseholds. This often includes a service charge – money the owner pays in order to contribute to the upkeep and maintenance of the building and any communal areas within it such as hallways, lifts, and gardens. Many modern new-build blocks of flats also come with extras like communal swimming pools, gyms, and saunas, all of which increase the service charge. When buying a leasehold new-build, this service charge must be considered when planning for the ongoing monthly budget and can often be the difference between a new-build being affordable or not.
When buying a flat, it’s also important to consider that space might be limited which will require the owner to rent additional storage space – another ongoing monthly expenditure. Car parking space, should it be required, also tends to come as an additional rental cost.
Outside of leaseholds, new-builds in general can have a number of unexpected extra costs. These include paying for extras and upgrades in the home, such as high-end decor materials, furniture and fittings. It’s important to know that new-build show homes are usually finished to a premium standard (think hardwood floors, granite countertops, and so on) so, in order to mirror this with the purchased property, additional costs in the thousands of pounds must be expected.
And then there are the hidden costs that come with snags, hidden issues with the structure or finish of the home which, if not identified quickly enough, can be expensive to correct. It is estimated that 98% of new-builds have some sort of snagging issue, ranging from mild to severe. And while the developer will likely be responsible for correcting such issues, they often implement a timeline in which they will do so. It is vital, therefore, to have a full snag inspection as soon as possible, examining things like loft insulation, window sealants, brickwork pointing issues, and poorly fitted windows and doors, before the developer’s warranty expires.
Finally, there are new-build costs to consider outside of financial expenses. These might include disruption from ongoing construction – many developers will start selling units in a building before all of the other units have been completed. Not only will this leave the owner dealing with noise, but it could also result in connectivity issues for things like broadband and TV.