Homebuyers in London are being lured to over-pay for new homes by as much as £125,000, according to research by new property search engine Propcision.
It has long been accepted that new build properties can command a higher price. Homebuyers can expect to pay an industry-norm of a 20 per cent premium in exchange for a newly-constructed building and a pristine apartment.
However, when breaking down boroughs by a per-square foot unit, the Propcision (www.propcision.com ) statistics show that a homebuyer is actually paying between 35-60 per cent more to purchase a new-build property than a non-new build.
Shockingly, some developers registered with the government’s London Help to Buy scheme are charging up to 60 per cent more for their new-build apartments than the average price of an existing apartment in the same borough.
In Croydon, for example, the average asking-price-per-square foot of an existing property is roughly £420 per square foot. If the homebuyer were to purchase a new-build apartment in Saffron Square, a new development in Croydon, they are paying, on average, £670 per square foot. This is a difference of 60 per cent more than the overall average asking price of Croydon. The Berkeley Group, a registered Help to Buy developer, is behind the Saffron Square development.
Propcision co-founder Michelle Ricci said: “With this premium pricing, home buyers in London risk being trapped in a new-build unable to move on without incurring losses. The sting becomes more painful when incorporating the sometimes-hefty yearly services charges.
“Based on price per square foot – the most accurate way to value property dispassionately – the current pricing of many new builds simply isn’t sustainable.
“It appears the price spiral is an unintended consequence of the new Help to Buy legislation.
“Our advice to home buyers who have their heart set on a new build home is seriously consider comparative prices in the area before making the leap.”
This discrepancy is not just limited to Croydon. In Lewisham, for example, the same pattern exists. Barrett Homes, another Help to Buy registered developer, is developing the Renaissance near Lewisham Station. If a family purchased a small two bedroom flat around 580 sq ft then they would have paid around £475,000. However, if the family were to have purchased a same size existing flat, they would only have paid £350,000 – a saving of more than £125,000 when purchasing an existing property with the Renaissance development priced at more than 35 per cent premium.
In Islington, the new 29-storey Canaletto development in City Road has a one bedroom apartment being marketed for £850,000 at nearly £1,300 per square foot. Within a 5 minute walk from the Canaletto, in a quiet residential area, a slightly larger, top-floor, south-facing, one bedroom flat offers 682 per square foot and is listed for £600,000 which is £879 per square foot – nearly 50% less than the Canaletto – a saving of £250,000. The developer, Groveworld, is not in the Help to Buy scheme.
Propcision has broken down the cost of home-buying into a price per square foot. By creating a comparable unit, such as square foot, consumers can easily compare one property against another.
Michelle Ricci said: “Because not all sizes of properties are equal, it’s incredibly difficult to compare a one bedroom property against another one bedroom property if the overall footprint of the property is different.
“By taking the price for each square foot of a property, consumers can use this bite-size unit to spot differences in pricing. They can then rationalise if it is worth paying a bit more, per square foot for one property over another. Perhaps one property has a better view, better location, is newly-renovated, or has a garden or outdoor space –all factors that contribute to the rationalisation of paying more for something better.
“Even so, such significant price differences for new-builds are hard to justify when you analyse the comparisons.”