Is New Build Property Investment a Good Idea in 2022?

Daniel Williams
Daniel Williams
Senior Property Writer
Updated 13 January, 2022
5 Min Read

New Build Property Investment New Build Property Investment

After a record-breaking year in the UK property market, you may have decided that 2022 is finally the year you make a property investment. 

While there are many strategies, one of the most popular in 2022 is a new build property investment strategy.

New build houses are an attractive option for many property investors, with lower maintenance costs and supplied modern furnishings having a clear advantage over an existing property. 

But with the so-called ‘new build premium’ seeing house prices rise to new heights, you may be unsure if a new build investment is the right choice. 

The following article will help clarify this by discussing whether new builds are a good investment in 2022. 

Topics include: 

  • Why invest in new builds? 
  • Where to buy a new build property? 
  • Top tips for buying new build properties 
  • The best alternative property investments in 2022 
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    Why Invest in New Builds? 

    Buy to let property has become a hot commodity in 2022 following a record-breaking year. 

    House prices across the UK have surged, with the average UK property reaching a record high in December 2021 of £254,822, according to Nationwide. 

    Factoring in that the average rental income in the UK ended the year at £1,060 per month – just £1 from the previous record, according to HomeLet – and it’s understandable why so many people are thinking of investing. 

    But are newly constructed properties the way to go? Let’s find out by looking at the pros and cons of buying a new build investment property in 2022. 

    Pros of Making a New Build Property Investment

    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. 

    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. 

    As new builds are brand-new properties, fewer maintenance costs are needed for the first few years of ownership. 

    This is a significant benefit for property investors, who won’t need to spend money on ensuring that the property is in a good state for renters. 

    New build properties are usually purchased directly from the developer of the project, which can often dramatically speed up the buying process. 

    This is often a “chain-free” transaction, as buyers don’t need to wait for individual sellers to secure a mortgage to buy another home. 

    Many new build properties can be purchased off-plan, which means buying a property that hasn’t yet been completed. 

    While this can be risky, the advantage is that developers will often offer incentives to convince you to invest. This can include free furniture packages and price discounts. 

    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. 

    Low Maintenance Costs

    As new builds are brand-new properties, fewer maintenance costs are needed for the first few years of ownership. 

    This is a significant benefit for property investors, who won’t need to spend money on ensuring that the property is in a good state for renters. 

    Easier Buying Process

    New build properties are usually purchased directly from the developer of the project, which can often dramatically speed up the buying process. 

    This is often a “chain-free” transaction, as buyers don’t need to wait for individual sellers to secure a mortgage to buy another home. 

    Cash Discounts Available

    Many new build properties can be purchased off-plan, which means buying a property that hasn’t yet been completed. 

    While this can be risky, the advantage is that developers will often offer incentives to convince you to invest. This can include free furniture packages and price discounts. 

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    Cons of Making a New Build Property Investment

    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 Land Registry data on the UK House Price Index in early 2022, the average new build property costs £348,188 – Over £90,000 more expensive than the price of a finished 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. 

    The Average Property Price in UK 2021

    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. 

    Most new build properties are found in an entire development, whether that be an apartment block or housing development. 

    This typically means properties are leasehold and can incur extra monthly expenses like ground rent. While they won’t be huge fees, it’s essential to make sure you can afford it alongside other costs like monthly mortgage payments. 

    Depending on the project developer and how they try to cut costs, many new build properties can be of substandard quality. 

    A report from New Homes Review found that 91% of new home buyers found defects in their new build homes after snagging surveys. 

    While these issues are often minor and should be fixed for free by the developer, it can be inconvenient to delay moving in your tenants. 

    This is why paying for a snagging survey before completion is vital and researching the developer to ensure this isn’t a common issue amongst their properties. 

    When buying homes from individual buyers, you can usually negotiate for a lower price. However, this is not the case with new builds due to the extra incentives attached. 

    This shouldn’t be too much of an issue, as you’re likely already saving thousands of pounds by buying a new build property with a top developer or investment company but it is worth keeping in mind when securing your investment. 

    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 Land Registry data on the UK House Price Index in early 2022, the average new build property costs £348,188 – Over £90,000 more expensive than the price of a finished 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. 

    The Average Property Price in UK 2021

    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. 

    More Potential Monthly Charges

    Most new build properties are found in an entire development, whether that be an apartment block or housing development. 

    This typically means properties are leasehold and can incur extra monthly expenses like ground rent. While they won’t be huge fees, it’s essential to make sure you can afford it alongside other costs like monthly mortgage payments. 

    Build Quality Can Be Lower

    Depending on the project developer and how they try to cut costs, many new build properties can be of substandard quality. 

    A report from New Homes Review found that 91% of new home buyers found defects in their new build homes after snagging surveys. 

    While these issues are often minor and should be fixed for free by the developer, it can be inconvenient to delay moving in your tenants. 

    This is why paying for a snagging survey before completion is vital and researching the developer to ensure this isn’t a common issue amongst their properties. 

    Less Room for Price Negotiation

    When buying homes from individual buyers, you can usually negotiate for a lower price. However, this is not the case with new builds due to the extra incentives attached. 

    This shouldn’t be too much of an issue, as you’re likely already saving thousands of pounds by buying a new build property with a top developer or investment company but it is worth keeping in mind when securing your investment. 

    How to Pick the Right New Build Property How to Pick the Right New Build Property

    How to Pick the Right New Build Property 

    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 2022 is 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 an 18.8% rise in property prices by 2026 – over 13% higher than London. 

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    Pros and Cons of Student Property Investment Pros and Cons of Student Property Investment
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    Property Type 

    Another important factor is to choose what type of property you’re looking to buy. 

    The reality is that you can invest in several different strategies by buying new build properties, including commercial real estate, student property investments, city-centre apartments, or family homes. 

    Which property type and strategy you choose will likely depend on how much money you can spend and your investment goals. 

    For instance, student properties and city centre apartments will be far more affordable than a family home. 

    While this will mean less capital growth in the long term, you will enjoy higher rental income and rental yields due to the lower prices. 

    The type of investment you choose will also impact the location you pick. For family homes, you’ll likely want to invest in more rural areas or somewhere outside of the city centre. 

    For student property, you’ll want to buy properties close to university campuses and will want to consider the student population of a city – you can learn more by checking out our blog on student property investment in 2022. 

    And finally, city centre apartments will likely mean you’re targeting young professionals, which means you’ll want to target properties with good transport links nearby. 

    Most essential rental property features Most essential rental property features

    Features 

    Covid-19 and the resulting lockdowns have dramatically changed what tenants want from their homes in 2022. 

    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. 

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    Top Tips for Buying New Build Properties Top Tips for Buying New Build Properties

    Top Tips for Buying New Build Properties 

    Buy Off Plan for the Best Savings 

    To get the most bang for your buck, it’s a good idea to buy new build properties off the plan. 

    Off-plan property is a property that’s available for purchase but hasn’t yet been completed. 

    While this sounds risky and means that you’ll have to wait for your property to be completed, the trade-off is that you can save thousands on your purchases. 

    For instance, here at RWinvest, we specialise in off-plan properties and offer some developments at over 55% below market value. 

    You can learn more about why investing in off-plan property is a smart choice by clicking the link. Remember, though, that due diligence is key and you should research developers to ensure they’re reliable. 

    Use a Property Investment Company Like RWinvest 

    If you’re new to investing, the world of real estate can get complicated, with regulations and processes involved in the buying process. 

    To get the most beginner-friendly and straightforward journey possible, or if you want a more accessible experience in general, using a property investment company is a wise choice. 

    Using a property investment company can save time searching for property instead of spending hours browsing websites like Rightmove.  

    Instead, you can have a quick chat with a specialist who will point you towards the current best opportunities on the market based on your budget and goals. 

    Some companies will even offer developer incentives like free furnishing packages and guaranteed rental returns for a set number of years, so you won’t need to worry about void periods. 

    By having a point of contact you can trust, you’ll get regular updates on the development process of your new build, which means you can build a good investment portfolio without worrying. 

    You can learn more by checking out our blog on what is a property investment company. 

    Make Sure Your Property Is Protected By NHBC Warranty 

    One of the significant benefits of buying a new build property is that many are protected under the NHBC Warranty. 

    This warranty lasts for 10 years and will protect up to a 10% deposit in the time before the property is finished. And for the first two years, the NHBC will help you with any disputes regarding faults with the building work. 

    However, not all properties are protected by this warranty, so be sure to check with the developer or investment company to ensure your investment is as protected as possible. 

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    New Build Properties for Sale in 2022 With RWinvest

    Thinking of buying an investment property?  

    We’ve got a tonne of opportunities upcoming in 2022 that are available to purchase with us here at RWinvest. 

    The following section will show our top new property in 2022 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. 

    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. 

    Who Is RWinvest? 

    RWinvest is an award-winning property investment company with over 18 years of experience in residential and student property. 

    We were named the North West’s Best Property Business in 2020 and were nominated as Business of the Year in the prestigious Echo Regional Business Awards. 

    With a portfolio worth over £1 billion, 75,000 investors, and over 1,000 five-star reviews, there is simply no other investment company like us in the North West. 

    Our offices in Liverpool, Manchester, and London, mean we are perfectly positioned to collaborate with the UK’s best developers. 

    You can learn more about us by clicking the link or can read about our three-step sales process on our website.  

    Embankment Exchange - 2 Beds from £299,950 Embankment Exchange - 2 Beds from £299,950
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    Are You Ready For a Property Investment? Things to Consider in 2022 

    While we think making a property investment is a top choice in 2022, 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 to 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-0ff investment – key for those with a full-time job. 

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    The Mill

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    Liverpool Prices from £139,950

    Assured 6% NET Rental Return

    Grade 2 Listed Building

    Exclusive Investment Opportunity
    Liverpool Prices from £125,995

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    Stylish Liverpool Apartments

    Off-Market Property
    Manchester Prices from £200,000

    5% Projected Rental Return

    Amazing Onsite Facilities

    RWinvest Award Winning Property Investment Company RWinvest Award Winning Property Investment Company

    Make a New Build Investment With RWinvest in 2022 

    We hope you enjoyed our blog on new build property investment. 

    If you want to make a property investment in 2022, be sure to contact us today and speak to one of our property experts to learn more about the latest opportunities for you. 

    Alternatively, if you want to learn more about investing in new builds, check out our blog post answering ‘do new builds increase in value over time?‘ for more insight into new build investment.

     

    Disclaimer: This guide was published in January 2022. The data provided may no longer be accurate once you read it. This guide is not investment advice. Be sure to seek professional advice from a financial advisor to decide if investing is right for you.

    Daniel Williams
    Daniel Williams
    Senior Property Writer

    Daniel Williams is a senior property writer at RWinvest. Regularly publishing in-depth articles on topics such as the best investment areas in the UK and guides on how to invest, Daniel has a keen eye for statistics and analysing property market changes.