Investors enjoy rental income and impressive capital growth – something other investments, such as stocks and shares, don’t provide. Buy-to-let new build investments enhance investor benefits. Reduced maintenance, increased energy efficiency, and easier buying processes are huge tick boxes for those looking for a profitable investment property with less hassle.
We combine our knowledge of the current climate and insights into the new build property market to explore the prospect of investing in a new home as a buy-to-let investment property!
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The Rental Market
According to HomeLet, the average rental income in the UK in November 2023 was £1,279 per month, up by 9.63% compared to 2022. A report from Zoopla notes that UK rental demand is 32% above the 5-year average. Coupling the significant increase in yield with a high demand for rental properties indicates property to let as a sound investment.
See Returns, Quickly
A new build property is immediately ready for tenants. Some new builds have integrated appliances supplied, taking the difficulty out of selecting, delivering and installing the appliances after purchase. It means that tenancies can begin without delay and that the quality of the appliances – as well as their design, materials and colours – match the quality of the rest of the property. Having integrated appliances means your tenants won’t need to have their own appliances, or be tempted to install their own, which can cause complications at the end of their tenancy, delays, and the risk of damaging the kitchen, hallways and any shared areas as their bulky items are moved.
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Low Maintenance
A new build property presents fewer maintenance costs as everything will be new – carpets, kitchen, bathrooms, paintwork. The structural elements will be covered under the builder's ten-year warranty.
Energy Efficient
Using modern building techniques, new build properties usually have a high energy efficiency rating. Research suggests people are willing to spend 12% more on sustainable products, so an energy-efficient property could be more lucrative than an older property. A survey by Zoopla found that new-builds can save 52% on energy costs over a year. Tenants are likely to be attracted to the cheaper living costs.
The energy efficiency of a new build also saves investors money. The new EPC rating regulations will see landlords of older properties needing to make significant changes to ensure properties fall within the A, B or C rating. Adding features such as heat recovery systems, solar panels, LED lighting, and leak detection systems could prove costly on an older property. A new build is more likely to have a better rating as standard.
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Easier to Purchase
Investors buy new build properties directly from the developer. This eliminates a chain, speeding up the buying process.
Increased Capital
New properties are mostly built in regeneration areas or outside towns and cities. These promising locations often become communities with schools, amenities, and excellent transport hubs.
Newly built properties experience price inflation within the first few years. This can translate to higher rents and increased returns. ONS figures for October 2022 showed an annual increase in the average price of new builds of 22.7%.
Fetch Higher Yields
Modern homes in up-and-coming areas are highly desirable to young professionals and families. Such contemporary homes are often close to schools, shopping centres, and transport, enhancing their allure. With desirable properties in their portfolio, landlords reduce void periods and enjoy increased rental yield.
But, Do Your Due Diligence
Buying a new build property has the potential to attract more tenants, reduce void periods, and increase rental income.
However, it’s important to research the company building the property. If you’re buying a property off-plan, you need to ensure there are no delays. Research from New Homes Review reports that 37% of new builds aren’t completed on time, delaying your returns.
Look closely at the developer's website and read reviews on a third-party site like Trust Pilot. Low-quality developers may be more likely to experience delays or even go into administration during the build.
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Are New Builds Worth It?
New builds often come at a higher price. Land Registry Data found that they can cost 23% more. While developers may offer perks, they’re unlikely to negotiate. However, new builds can fetch a higher yield as people are willing to pay more for a premium property. Investors will also enjoy reduced void periods and see returns from day one.
If you’re considering investing in a home, start a conversation with the Berkshire Hathaway Homes Services team. As Central London Estate Agents, we have a selection of new build homes for sale.
