New Builds vs Older Properties, Which is the Best Choice for UK Property Investors in 2024 to 2029?

Choosing between newly built and older properties can be tricky for property investors, as there are pros and cons to each choice. The right decision depends on what kind of investor you are and the individual properties in question – to help you decide, I have put together this guide to older property vs new builds, including benefits and drawbacks to each and my own property predictions for the next 5 years.

New Build Properties

New build properties are those that have just been built and have never been occupied. Here are some of the main features of new builds including benefits and drawbacks of investing in them.

5 Potential Benefits of New Builds

Higher energy efficiency. Most new properties are built with energy efficiency in mind, including advanced double glazing, effective insulation and a modern heating system, so most of them will achieve an A or B EPC rating. This means lower energy usage and cheaper bills for potential owners or tenants.
Modern building materials. Most new builds use techniques and methods such as modular construction, precast flat panel systems, self-repairing insulated concrete, and other techniques that offer durability and enhanced safety.
Lower maintenance requirements. The use of contemporary materials and technologies means that new builds are less likely to need regular maintenance, and some repairs may even be covered by a builder’s warranty.
No chain. New builds don’t have an existing owner, so there is less chance of delays or the sale falling through.
Modern fixtures and decor. Many older homes have dated fixtures and fittings, and need a new kitchen or bathroom or at least redecorating before they are ready to be let or sold.

3 Potential Drawbacks of New Builds

New builds are usually more expensive than an older property of the same size and location. It is possible to get a discount on an ‘off-plan’ property, i.e., one you agree to buy before it is completed, although this can be a risky decision as the property may not be completed on time, or the development company could even go bust.
Smaller floor plans. A lot of new builds are planned to fit as many houses as possible onto the development site, leading to more cramped homes, a lack of parking spaces, and overlooking other people’s homes or gardens.
Build quality and snagging. Snagging involves completing small jobs to make a property fully move-in ready, such as ensuring doors and windows function properly, plumbing works, and there are no paint splatters or scratches. Surprisingly, 91% of new home buyers find defects upon moving in. A snagging survey is worth the investment, and all repairs should be covered by the builder’s warranty.

4 Potential Benefits of Older Properties

Older houses often have their own unique character and period features, which are popular with buyers and rarely found in newer properties.
More space. Older homes often have bigger rooms, larger gardens and more parking space, making them ideal for tenants and buyers who have families, more than one car, or like to entertain at home.
Lower property prices. Depending on their condition, older property prices are generally lower than new builds, offering more square footage for the money. Some of these savings can be taken up by required renovations, so bear this in mind.
Potential for adding value. Older properties often give you the opportunity to add value with renovations, extensions and other improvements, whereas newer properties are harder to add value to.

4 Potential Drawbacks of Older Properties

Higher maintenance needs. Older houses that have been standing for decades and had multiple owners will need more maintenance to keep them looking good as well as safe and structurally sound.
Less energy efficient. Older properties are generally less efficient than new builds and require more energy to heat and cool them, and may come with older heating systems and boilers that could need replacing.
High renovation costs. While older houses are cheaper to buy, they may need a lot of renovation and refurbishment to get them ready to rent out or sell, such as new fixtures and fittings, or at least redecoration to replace offputting old-fashioned carpets and wallpaper.
Potentially long chains. Older properties can be part of a long sales chain, where the current owners are waiting for their next home to be available before they can move out, and so on, and could even lead to the sale falling through.

Comparing Potential Returns on Investment (ROI)

New Build Property ROI Potential

New builds can attract higher rental yields, especially in high-demand areas, but their higher purchase price may offset this initially. The lower running costs of energy-efficient homes appeal to tenants and buyers. If you want immediate income without renovation expenses, a new build could be a good choice.

Older Property ROI Potential

Older houses often have lower purchase prices, making them accessible to new investors and offering better rental yields. Strategic renovations like extensions, updated bathrooms and kitchens, or energy-efficient additions can significantly increase their value. However, refurbishment costs can reduce profits, so consider these expenses when calculating ROI.

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Factors Influencing ROI

Location

Areas with a high demand for housing can offer better rental yields and selling prices. Areas with high growth potential, e.g. those with planned regeneration projects or infrastructure developments can see house prices rising, giving you a higher ROI.

Market Trends

The supply of new housing and mortgage rates can affect the ROI – when house prices are high, you can expect high rental yields and high sale prices as the demand for both goes up. Overall economic conditions can affect rental yields and property values as a whole, so keep up to date on economic and political news.

Government Policies

Government policies like plans to build affordable new housing, changes in property regulations or help to buy incentives can impact investment returns – the results of the upcoming UK general election in July are likely to affect the property market.

Looking Ahead: 2024-2029 UK Market

UK Economy

Over the next five years (2024-2029), housing prices are expected to continue rising, although inflation and high living costs may keep the market fairly sluggish unless more efforts are taken by the Bank of England and the government to reduce inflation further and create more incentives for first-time buyers.

Regional Variations

House prices in London are expected to fall, as more people are leaving the capital due to the cost of living crisis and more development and regeneration of northern cities like Manchester. Working from home or hybrid working means fewer people need to be based close to their workplace, so they are free to move to a location with cheaper living costs.

Construction and Material Costs

Rising costs of materials and labour may make renovating older properties more expensive, especially with proposed regulations for energy efficiency meaning older houses need more renovations. However, the charm of period properties as they become rarer over time may continue to drive demand.

Sustainability and Net Zero Goals

The UK has ambitious plans to achieve Net Zero by 2050, and the construction industry will need to fall in line by focusing on energy-efficient newer builds that use more sustainable materials. Depending on the size of new developments, it could be more efficient to renovate older buildings than to build brand-new ones so this trend could benefit either investment choice.

Choosing the Right Investment

When choosing between investing in new builds or older properties, always consider your financial situation, investment goals and the current market conditions. The key things to consider are:

Budget – initial investment capacity and ongoing financial commitments of your investment
Risk tolerance – think about your comfort level with the potential depreciation of new builds and the renovation and maintenance costs of older houses.
Location – educate yourself on the market trends and growth potential of your chosen location
Investment goals – consider what your goals are both short and long-term, and how each investment option aligns with these.

Thinking carefully about everything outlined above can help you make the right decision that works for you and your goals for investment.

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