New build differential
Newly built properties often command a premium over second hand properties. However, this can be area specific. This premium is usually perceived to be due to several factors including higher energy rating standards, new home guarantee provisions, kitchen and bathroom design and specification, new walk-in condition of the property and the provision of the ‘snagging’ service by the housebuilder for any corrective remedial works.
Indeed, the average transaction price for new build properties across Edinburgh City and Glasgow City last year was 25% and 38% higher respectively, compared to second hand transactions in both cities. The price differential during the middle of the last decade quickly reduced in certain areas, where high levels of supply did not meet market requirements.
However, the lack of new build supply, following the housing market downturn, has led to some second hand sales in hotspots of Edinburgh and Glasgow achieving a premium over the original new build price.
Examples of these include a major development in central Edinburgh, where a number of second hand property sale prices have exceeded their new build price. This includes a two bedroom apartment which recently sold for £360,000, which was 9% more than its original new build price.
Similarly, a second hand two bedroom apartment, at a development in the Hyndland area of Glasgow’s West End, recently sold for £325,000, which was 12% more than its original new build price. Similar premiums have been achieved at a recently-built development in the Merchant City area of Glasgow’s city centre.
It is not just core central areas where such premiums have been achieved. a number of second hand sale prices at developments in the Kirkliston area of Edinburgh have sold for more than their original new build prices. It is sufficient to say that certain new build properties can retain their value particularly in areas of high demand in central and strategic locations with excellent transport links, coupled with low levels of supply.
Government initiatives
The Help to Buy (Scotland) scheme has been an important force in the new build market since it launched in October 2013. It allows purchasers to buy a majority share of a new build home, up to the value of £400,000. Purchasers will need a minimum 5% deposit and a 75% mortgage. The Scottish Government can provide an equity loan for remaining sum up to 20%.
Table 1 shows the geographical breakdown of where Help to Buy has been used. Sales staff at various new build sites have reported that Help to Buy is allowing purchasers to acquire a better property than their budget might previously have allowed. It has been particularly beneficial in regeneration area developments.
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