Should I buy a new build or a period property?
By Jo Eccles
Q: As a first time buyer, am I better off buying a new build property or a flat in a converted Victorian house that is far less costly?
A: If you’re buying a property for yourself, rather than as a pure investment, the decision on which property to buy is emotional as well as financial. So you need to ask yourself which property style you prefer as they do tend to be quite different. Period properties, for example, often have more character and higher ceilings, whereas new build properties tend to have better layouts and they’re more energy efficient and so on. However, if you’re keen to get on the property ladder and you would be happy with either option, then there are financial aspects to consider.
Firstly, the cost of the property is something to weigh up. If one is much cheaper than the other then that is attractive. Do think about your re-sale value as well, though. If you’re buying a new build which is in a large development and is identical to many other properties in the building, the lack of rarity value may subdue your capital growth prospects. This is where having in-depth knowledge of the local property market and pricing becomes quite important.
As well as your purchase price and resale value, you also need to consider the outgoings of the property during your ownership.
Service charges can vary significantly between new build properties and Victorian houses which have been converted into flats. Often, new builds will have a formal managing agent in place who oversees the maintenance of the building and collects formal ground rent and service charges. Typical service charges for a one or two bedroom new build flat in London can be around £2,000 – £3,500 per year, so they are a considerable outgoing to factor into your disposable income. Additionally, many new build developments have extra facilities such as a gym or concierge which increase the cost of the service charge further. However, they are usually predictable so you know how much you will be paying each year.
On the other hand, a Victorian property which has been converted into, say, three to five flats is often run by the residents or a freeholder (depending on the ownership structure of the flats) on a much more casual, ad hoc basis. Typically, residents pay enough service charge to cover the annual outgoings such as insurance and cleaning of communal areas. They may not collect enough service charge or ‘reserve fund contribution’ to save up for ongoing maintenance such as replacing the roof, though. So, if the building is not run formally with provisions in place for bigger expenditure, there is the risk that you may need to inject extra funds at some point which can be difficult to plan for.
Energy efficiency is something else to consider as new builds will rate much higher, so you’d expect heating bills to be less.
If you have a question you’d like Jo to answer please email Jo.eccles@SPpropertygroup.com or tweet her @joeccles.