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A recent report from Hamptons, part of the Countrywide Group, shows that last year the average new home sold for 17% more than a comparable second-hand one, up from 15% a decade ago. This figure is an average from the thousands of developments up and down the country, each of which is competing for buyers in their local market. Breaking down this headline number shows that the level of premium developers are able to achieve depends on what, how and where they’ve been building.
Over the last five years house builders have achieved the largest premiums in the cheapest and most expensive housing markets. The half of developments which carry a larger than average premium are almost exclusively found in the cheapest and most expensive neighbourhoods – 30% and 20% respectively. Developments offering Help to Buy tend to achieve above average premiums because of the boost to demand resulting from the scheme. But it’s also worth pointing out that not every new home carries a premium. Around one in five new homes costs no more than a comparable second-hand one.
In an area’s cheaper neighbourhoods, the size of the new build premium tends to be driven up by the difference in the quality of new and existing housing stock and the impact of regeneration. In some cases, this is a product of builders using superior construction methods to 30 years ago, while in others it’s the result of the low level of investment which has gone into homes. With refurbishment costs relatively fixed, new homes in places where the cost of doing up a home makes up a bigger proportion of a property’s value tend to carry larger premiums.
At the other end of the scale, commonly in more expensive neighbourhoods, big premiums tend to be driven by developers pushing boundaries. Here some more affluent buyers can, and are willing, to pay for amenities, features and a higher quality of design and construction that aren’t available in the surrounding area. Those developers who push boundaries and introduce new products can achieve healthy premiums in return.
The full Hamptons Report ‘Firing the starting pistol’ can be found here
Content supplied by Countrywide Group.
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