We asked Upad.co.uk, the rental experts, for their advice on whether new builds are good for buy to let:

A survey by Ludlowthompson showed that, of property investors intending to expand their portfolios in the next six months, only 12% intended to purchase newly built properties. Asked the same question back in March, 26% said that new-builds would interest them.

There’s no doubt that the housing market has suffered from an over-supply of new-build properties, as developers who overbuilt during the boom try to clear their stocks, urged on by the banks who want to recoup their more speculative lending. The problem is particularly acute for those who built blocks of apartments – exactly the area that many buy to let landlords might be interested in.

On paper, this clearance stock looks as though it might be a perfect buy to let proposition: prices are low, meaning that landlords can have some flexibility over the rents they charge. This in turn will help to minimise void periods: properties will be filled and earning their keep much more quickly. Investors who can snap new-build up while its cheap could have a great capital investment which will appreciate while the housing market slowly recovers.

But investors are right to be wary. An over-supply of property for sale can, all too easily, turn into an over-supply of property for rent. While the general mood of the rental market is improving, things are not yet stable. Unemployment remains high and some predictions have it going higher for some months to come. In such circumstances, first jobbers are likely to share with friends or even stay with their parents, meaning that this usually reliable supply of new tenants may not be there. And with horror stories from the student sector of loans in chaos, “pile ‘em in cheap” apartment blocks are a risky investment indeed.

When developers have built huge apartment blocks or even several similar blocks together, properties quickly become commodities.

James Davis, Upad.co.uk’s CEO and a landlord himself, counsel’s caution: “As always, investors thinking of going into this market need to do their homework first. The thought of a property bargain can be dazzling, especially if you have an annual bonus burning a hole in your pocket and the bank’s only offering you 1%, but buying a property that you can’t let out at a profit is an expensive mistake to make.”

James says, “The golden rule is to consider supply versus demand. Developers who can’t shift new build stock might be offering it at knock-down prices, which can look as though it means you can afford to take lower rents.

But if a dozen other landlords on the same street have had the same idea, which can mean that everyone is competing in a race to the bottom, with everyone trying to undercut their neighbours. What is worse still is that if there isn’t consistent and sustainable demand for rental property in the area, over-supply can mean that some properties end up being left void for much longer than normal. It’s essential that those thinking of buying new build do their research – not only into rental prices for the area, but that they also look at how many other similar properties are likely to come onto the market at the same time as theirs.”

Those who can afford to buy up entire developments may find themselves in a stronger position, as they can control supply and thus rents more easily. Discounts available for the purchase of entire blocks are considerable, and those with the assets to do this will find themselves advantaged over smaller investors purchasing just one or two properties in a street full of others doing exactly the same thing.

Opening the door on a new house is a wonderful feeling.   It smells fresh, like a blank canvass.  There’s no one else’s imprint on it and let’s face it a new house is more energy efficient reducing your bills before you’ve moved in.

A newly built home is proving more and more popular in the United Kingdom due to the fact that they are constructed for modern living and as such are well planned allowing for today’s lifestyles, being environmentally friendly and more economical to run.  In most cases when buying a new build the customer gets to choose fittings such as flooring, kitchen cupboards and tiles in the bathrooms which all add to the feeling of ownership.  A new build allows you to add touches that make your house individual right from the start.

Some buyers find it daunting taking on a newly built house as it means developing the garden from scratch and waiting whilst the estate or area is completed before you see the true value of the property but today’s builders are aware of all that and more than happy to work out a plan that suits the buyer (within guidelines) to overcome these worries.  Most builders will turf your garden for you and some even add shrubs and fencing so all that’s left for you to do is enjoy beautifying it!  These days kitchens are integral and have the white goods fitted as part of the overall house price so you don’t have to worry about that either and if you buy early enough ie:  off plan, you could also request changes to layout if necessary.

New builds are generally planned with the local amenities in mind so you know you’ll have good access to schools, shops, bus routes and main arterial roads as well as hospitals and libraries.  All this is good for the resale value of a new build but to maximise the profit on a new build you really need to buy off plan and be prepared to wait for the estate to be fully developed.  Builders usually have offers that reflect the phase of building on an estate eg:  if you’re one of the first to buy the offer should be the most competitive one.

Things to consider when buying a new build include:

- At what phase are you buying in?

- How long will it take for all phases to be completed?

- When will the roads be tarred?

- What size are the neighbouring plots?

- What amenities are close by?

- What choices do you have on interior?

- Do the rooms have built in cupboards?

- Are white good included?

- What deals is the builder offering at which phase?

Some builders  are known to offer all sorts of deals on new builds even taking your old house off you as a part exchange so, if you’re really wanting to move on up and modernise why wait?  Take advantage of the upswing in the market and get the home you’ve always wanted.  What puts the cherry on top is that a new build comes with structural guarantees protecting you from any nasty surprises!

Question:
Online Enquiry
An enquiry has been made on the Property Price Advice website with the following details.

Full Name:
Jeanne – Bristol

Enquiry:
I’d like your opinion on ‘trading in’ my 3 bed semi for a new build.  Would I be doing this at the right time?  I would also like to know more about any hidden costs or possible pitfalls of doing this via a builder.

Answer:

Timing is always an issue in any property situation and never more so on new builds with the election looming in 2010 however that shouldn’t affect a part exchange deal undertaken now as most builders part exchange where the home being traded in is no more than 70% of the selling price of the house/plot being purchased ie:  the same % applies regardless of the current market value.

A few things to watch out for are:
1) Check the limit that the builder will offer i.e. there’s usually a maximum value for your current property.
2)Be aware that at least two (2) independent valuers will value your home at what it is likely to achieve in the current market i.e. not an advertised sale price and the offer is likely to be an average of those.
3) If you cancel the deal after introduction of a buyer by the builder for your own home you can still be liable for the fees involved so check first.
4) The builder will ask for a retention bond/deposit against the condition of your old home and accurate meter readings from utilities companies of around £500

Having said that doing a part exchange for a newly built home is one of the better ways to achieve the home you want in a deflated market where selling your own home is difficult.  It provides you with a guaranteed purchase, you can move in when your new home is ready and, more often than not you save on expenses as newly built homes are economical and efficient in terms of energy saving and maintenance giving you peace of mind too!