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Buying new offers good value in wider market

“The continued steady growth in the price of a new home in April shows the strength of demand in spite of election uncertainties which may have led some buyers to hold fire on a new home purchase.

“A subtle shift in the property market is now occurring with the traditional emphasis on ‘location, location, location’ now seeming slightly less important, with buyers increasingly prepared to compromise on their preferred area in order to secure a brand new home.

“The price buyers are prepared to pay also remains well ahead (14%) of the stock price on SmartNewHomes.com. This suggests that, not only are buyers reacting to the perceived and actual lack of new stock, but also that the added value of buying a brand new home, which needs minimal extra expenditure after moving in, is seen to be more expensive than it actually is.”

“There is still high demand for apartments in the South East commuter suburbs where young professionals and downsizers are looking for high specification, ‘lock up and leave’ homes. Demand in the coastal regions of the South West and along the South coast has also been strong with a mix of early retirees and cash rich investors still in the market for apartments in good locations.

“Detached homes on smaller developments within commuting distance of larger regional towns, London or the South East’s airports are holding their own and there is evidence that city bonus money has been a factor here.

“A thin shaft of light may be appearing in the valuation of new homes, with surveyors more inclined to value at the asking price, or at least meeting the developer half way. This is due in part to the lack of stock in the second hand market pushing prices upwards, but is not yet an overall trend and other market factors could still have a huge influence.

“The pre-election Tory pledge to create a nation of property owners will fall flat unless the £300billion mortgage funding gap is filled. The absence of any reference to the shortage of finance in the coalition government’s latest document is extremely worrying.

“Many homeowners may be benefiting from low interest rates on existing mortgages, but loans at these rates do not exist for new mortgages and the home loans market still remains closed to those without considerable equity and a spotless credit rating. New home buyers should compare what the developers’ mortgage brokers are offering as they are best placed to know which institutions are willing to lend on new build property.

“Meanwhile, developers have responded to demand by adjusting the mix of property types under construction: the proportion of detached homes for sale has risen by 7.2% in the last year.

“In historical terms we continue to ‘bump along the bottom’ in terms of the number of new homes being built as credit problems, planning difficulties and a shortage of land stymie attempts to meet consumer demand. The shortage of new homes is a national scandal, but as economics Professor Michael Ball stated in his recent report, we are unlikely to see any significant uplift in build volumes until the government acts to free up the supply of land for development.”

“The best-performing region is currently the South West, where new-build property prices have risen 9.7% in the last year. However the region’s two principal cities have had contrasting fortunes: Bristol’s more varied economic base, including the port as well as hi-tech aerospace research and creative industries mean house price growth is in line with the wider region, up 9.7% over the year. Exeter, by contrast has seen prices fall by 8.8% over the previous 12 months.

“New-build property prices in the West Midlands continue to struggle with the annual decline in prices currently at -21.2%. The area, traditionally home to many manufacturing industries, has been hit hard by the recession. However, the average price has bounced back from a low of £161,072 in September last year, with this month’s rise being 3%, means things are starting to look up in the local market.

“In all areas, new build properties remain significantly undervalued in comparison with the wider market.”

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