Why Are New Build Properties in High Demand?
2020 presented the construction industry with many challenges, from national lockdowns to strict social distancing guidelines. With 42% of UK building sites temporarily shutting down in April 2020 in line with government guidance, the supply of new build properties has fallen significantly in the past 12 months.
Although the construction industry delivered 255,000 new homes before the onset of numerous national lockdowns, the demand for these properties has continued to outweigh the supply. During the post-lockdown boom, the demand for new builds surged, with a 66% rise sustaining the new build housing market.
This increase in demand brought a ‘near recovery’ of the construction industry in Q4 2020, due to the registrations for new homes climbing 34% when compared to the previous quarter, amounting to an impressive 39,749 new homes. Unsurprisingly, this rebound was not substantial enough to meet pre-Covid levels of production – numbers decreased by 23% overall – but represents the exceptional demand in the industry.
Nonetheless, New House Build Council CEO, Steve Wood, has explained: “The new build housing market has held up very well, with house builders showing resilience and adaptability throughout 2020. The market is still positive.”
The continued demand for new build houses was largely due to the nature of the selling process. While the majority of the property industry had to adapt to virtual viewings, selling off-plan properties without physical viewings is common practice amongst these developers. New build houses are sold based on CGIs, meaning the industry already had a solid understanding of what is required to sell properties without physical stock.
Who is Driving this Demand?
There are multiple variables that contribute to the appeal of off-plan properties, and with the Stamp Duty holiday making the process of buying a property more affordable, the growth in demand was inevitable.
Multiple government schemes are in place surrounding new build homes, which aim to make getting on the property ladder more accessible for many, especially the younger generation. While statistics show that over the last decade, the number of people under the age of 45 who own their own home has fallen by 10%, younger individuals remain a strong demographic of buyers.
With the Help-to-Buy scheme offering an additional 25% towards the buyer’s deposit, it is no surprise that younger groups aged between 25 and 34 made up 41% of homeowners in 2019-2020. 56% of those aged 35-44 were also owner-occupiers during this time period, highlighting the strength of the government’s incentives.
Aside from the monetary benefits that come with off-plan properties, new builds also provide the luxury of time, with no chains allowing for a speedy completion. This is particularly appealing for first-time buyers, of whom have no existing properties to sell and can move in once the house is complete.
Purchasing off-plan properties also provides the opportunity to customise certain features such as carpets and doors. While this is always a desirable selling point compared to ready-made properties, is it even more appealing in the midst of a global pandemic?
A new build home offers a freshly built property, with no previous owners and brand new fixtures and fittings. With Covid-19 being reliant on people and surfaces to continue spreading, this luxury has been a contributing factor to the popularity of new builds over the past 12 months, according to Rightmove.
What this means for Property Investors
Investing in off-plan properties offers many advantages, including the potential for capital growth during the build period and the guarantee of a modern property unit. On average, a new build property takes two years to complete, with this time period allowing for the surrounding areas to endure natural capital growth. And with off-plan properties typically selling at a lower entry price, this increases the potential for greater returns on investment, should you eventually choose to sell the property.
An example is The Grand Exchange – a one-of-a-kind development in the heart of Bracknell. This landmark residential development recently broke ground and is due to be completed in 2023, coinciding with the extensive regeneration schemes throughout Bracknell and the wider South-East. Investing at the off-plan price two years before completion will allow Bracknell to solidify its position as an emerging location, which in turn, will raise the profile of the town. By the time The Grand Exchange completes, regeneration schemes and increased employment opportunities will likely make tenant demand soar.
To conclude, the continued demand for off-plan properties is beneficial for investors, with the attractive prices and potential for growth indicating more promising rates of returns, on both a short- and long-term basis. And, in providing tenants with the reassurance of fresh fixtures, the modern decor will simultaneously appeal to a wider tenant pool.