Firing the Starting Pistol
New build premiums
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The ability of a house builder to charge a premium for a house typically comes from a combination of three things; that it’s ready to move into, carries a guarantee and has been designed and built for 21st century life. The size of the premium varies by the location of the home, who built it, how it was built and the specification of the development itself. Last year the average new home sold for 17% more than a comparable second-hand one, up from 15% a decade ago.
But what happens when a new home is no longer new? The average person who sold their new home for the first time in 2017 had bought it brand new from the developer seven years ago. How much of a premium the home can still command when it’s no longer brand new depends on how both the property and the wider development have aged.
When the average new home is sold on for the first time it commands around half of the premium it did when it was sold as new. The premium a new home can command five, ten or even twenty years after being built depends on the builder, the buyer and, in some cases, the managing agent. Around a quarter of new homes, generally the very best developments, are able to hold on to their premium for life. Other schemes however see their premium eroded within the first seven years, the average time someone owns a new build home. But for most new homes, the answer lies somewhere in the middle.
But while the length of time a premium lasts varies, in general developers are getting better at building homes that hold onto their premium for longer. The average noughties new build holds onto twice as much of its premium compared to a home built in the nineties. For someone wondering what their new home will look like when it’s 10 years old could do worse than looking at one built by the same builder ten years ago.
Erosion of new build premium