New-Build Investment Driving the UK Housing Market

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New-Build Investments Outpace Existing Properties in the UK Housing Market

APRAO, a property development appraisal software, recently conducted industry research using the latest government data on house prices spanning the past decade. The aim was to understand the historical performance of both new-build investments and existing homes to determine which property type is currently propelling the market’s resurgence.

Let’s look at the data in more detail.

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How Much Has New-Build Investment Propelled the UK Property Market?

The findings reveal that, historically, new-build and existing homes have equally contributed towards positive market performance.

Over the past decade, new-build house prices surged by 73%, closely followed by a 63.7% increase in existing home prices. Over the last five years, existing home prices rose by 24.1%, nearly matching the 25.5% increase in new-build property prices.

However, new-build homes emerged as the primary driver behind the housing market’s recovery in the past year. Existing property prices only saw a marginal 0.2% year-on-year increase, whereas new-build homes witnessed a significant 8.1% rise. With supply down in 2023, it is no surprise that buyers have been looking to the new-build sector for property investment opportunities.

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Across all regions of Britain, new-build properties outperformed the existing market. The West Midlands, East Midlands, and North East exhibited the most robust growth in existing house prices at 1.2%, 1.1%, and 1% respectively. In contrast, new-build values soared by 9.2%, 8.9%, and 10.3% in these regions.

In certain areas, robust growth in the new-build sector counteracted an otherwise declining housing market. Despite year-on-year decreases in existing market values in the South East, East of England, and Scotland (ranging from -0.2% to -0.6%), new-build prices rose by 7.1% to 8.2%.

London faced the most significant challenges, attributed to high borrowing costs and property prices. Existing property values in the capital dropped by -1.3% year on year, whereas new-build values experienced a modest increase of up to 3.3%.

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What Do These Figures Say About New-Build Investment in the UK?

As the APRAO data suggests, we are witnessing the market bouncing back after a period of stagnation caused by limited buyer affordability due to increased mortgage rates. According to their report, 2024 has started on the right foot, with buyer activity, supply and house prices rising.

It might seem surprising that the resurgence is being led by the new-build sector, considering that new homes typically come with a higher price tag than existing ones.

However, this pattern is not uncommon. Despite the initial higher cost for buyers, they recognise the long-term cost-effectiveness of investing in a new home. This is attributed to lower energy expenses due to better efficiency, reduced maintenance costs, and a higher resale value.

This underscores the significance of new home construction in revitalising the housing market, especially when the existing sector is performing below expectations.

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New-Build Investment Driving the UK Housing Market