Is New Build Property Investment a Good Idea in 2024?

Ready to Move In

One of the best parts of new build property investments is moving in your tenants on day one.

As new builds will typically come fully furnished with all the needed white goods, property investors can instantly start seeing returns on their investment.

While you’ll still have to find a tenant before you can start earning, you can often secure a tenant before the property has even been completed if you hire a property management company.

More Energy Efficient Than Existing Properties

With sustainability becoming an increasing priority for homeowners and tenants, new build properties have a distinct advantage over older properties thanks to them usually having a top energy efficiency rating.

According to the Energy Performance Certificate data, around 80% of new builds have the top energy efficiency rating of A or B.

Research from Forbes in 2019 found that 54% of Gen Z and 5o% of Millennials were willing to spend 10% more on sustainable products – making energy-efficient real estate a major attraction.

Energy-efficient properties are also good for the wallet of a property investor, with homes with high energy efficiency not needing additional spending on features like double glazing or new boilers.

This year also saw the introduction of new EPC Rating regulations, expected to be implemented over the next few years, in which many landlords will have to spend a considerable amount to ensure that their properties are up to scratch energy efficiency-wise.

The good news is that those who purchase new-builds or off-plan properties will often experience a more cost-effective investment in comparison, as energy-saving features are likely to be part of the investment already.

Tend to Be More Expensive Than Existing Property

The major downside to new build properties is that the average price can be more expensive than older properties.

Referred to as a “new build premium”, new houses are often valued at a higher cost than older properties.

According to the latest new-build Land Registry data on the UK House Price Index in August 2023, the average new-build property cost £430,202 – Over £100,000 more expensive than the price of an existing property.

While this price can be wildly different depending on what type of property you buy (i.e., an apartment versus a house), you may have to spend extra on a new build home.

Of course, the trade-off here is that new homes will often be preferred by renters to older homes, with the ability to live in a house that has previously not been lived in before.

Due Diligence is Vital to Avoid Delays

When assessing a housing development, it’s vital to research the company behind the development thoroughly.

This is important as low-quality developers could lead to significant delays, with research from New Homes Review reporting that 37% of new builds aren’t completed on time.

More significantly, the developer could go bust while you’re waiting for your home to be completed, leaving you in a tough situation.

Although this is very rare, your best bet is to research the developer by looking at its past track record and past reviews. If the developer’s website doesn’t show its track record or reviews, then this will likely mean you should avoid investing with them.

Location

The first, and perhaps one of the most critical factors you need to consider, is the location.

Picking the right location is vital in property investment. There are substantial regional variations in the UK in house prices, rental income, rental demand, rental yields, and capital growth potential.

By picking the right area for rental properties, you’ll be able to maximise your chance of a successful property investment.

You’ll need to analyse the local market and new build market to do this. You can do this by thinking about a few crucial measurements.

They are:

• Affordability.
• Average rental income.
• Average rental yields (the return on investment earned from rent every year).
• Employment opportunities.
• Transport links/infrastructure.
• Regeneration potential.
• Capital growth/house price growth predictions.

You can read our complete guide to the best places to invest in UK property to learn more about this.

Where Should You Invest in New Build Properties?

For our money, the top two locations to buy new build properties in UK 2024 are Liverpool and Manchester.

Not only do these cities have substantial rental demand and affordable prices over £60k below the UK average, but they also have some of the highest house price growth potential in the UK – an essential measurement for those looking to earn money from selling their properties later down the line.

Research from Savills has found that the North West has the joint highest predicted capital growth rate in the UK, offering a 20.2% rise in property prices by 2028.

Covid-19 and the introduction of hybrid working have dramatically changed what tenants want from their homes in 2024.

According to research from Benham and Reeves, the top three most essential features in a rental property are now high-speed Wi-Fi, access to outdoor space, and nearby green space.

As such, you’ll want to find properties that meet this criterion to ensure your property generates as much long-term interest as possible.

The great news is that several new build properties already have these features to meet modern demand, which means you can feel confident knowing your investment will likely generate high interest.

Thinking of buying an investment property?

We’ve got a tonne of opportunities in 2024 that are available to purchase with us here at RWinvest.

The following section will show our top new properties in 2024 with some details all buy to let investors need to know. We’ll also explain who we are, what we do, and why investing with us can be a top choice.

Top Pick: Embankment Exchange

The newly launched Embankment Exchange is one of our best-ever property releases.

These pair of residential riverside skyscrapers are located in the heart of Greengate, an exciting regeneration zone in Greater Manchester.

Available at over 34% below market value and with 6% projected returns, Embankment Exchange comes equipped with the latest eco-technology and modern facilities every tenant wants in 2022 and beyond.

This includes a spa, on-site gym, luxury residents lounge, and a 24-hour concierge.

With 1, 2, and 3-bedroom apartments available, you don’t want to miss out on investing in this young professional haven, with 80% of stock already sold out.

You can learn more about this exciting opportunity by clicking the following link for Embankment Exchange.

While we think making a property investment is a top choice in 2024, it’s only good if you’re ready for it.

With that in mind, here are some tips and things to keep in mind when deciding to make an investment this year.

Landlord Responsibilities

By buying a rental property, you’re likely going to become a landlord.

But landlords aren’t just there to provide a home and earn rent, with many UK regulations dictating the responsibilities of landlords.

This can include maintenance work, ensuring all gas and electrical items are safely installed, providing an Energy Performance Certificate, and more.

If you lack the skills needed to do repairs, you could end up spending thousands. This is important to keep in mind.

You can check out the full details of your landlord responsibilities on the government website.

The Cost of Property

Property can get expensive, with mortgage deposits, stamp duty fees, and legal fees making property expensive to buy.

In fact, in our blog post, how much money do you need to invest in property, we found that you’ll require around £30k as a minimum to buy a property worth £100k.

And that’s not even factoring in the maintenance and running costs involved with property investment, which can include ground rent, monthly mortgage payments, and more.

Remember, too, that you may not always have rent to cover this, as your property could be vacant for months if you’re unable to find a tenant.

While you can avoid this as much as possible by buying new build properties attractive to tenants, you need to ensure you have a rainy-day fund to cover your expenses if the worst happens.

You Don’t Need to Invest Near Your Home

Most investors opt to buy investment properties near their homes to manage them themselves.

This can be a mistake, though, if the area you live in has a poor-performing housing market.

As such, don’t be afraid to invest in other cities that have better-performing markets. While you won’t be a hands-on landlord, you can hire a property management company to handle all of your landlord duties.

This will allow you to have a completely hands-off investment – key for those with a full-time job.