In 2021, nearly £6bn worth of new-build homes were purchased in England and Wales. New properties have made up a sizable portion of market value despite the challenges of the past year, including lockdown restrictions, shortage of materials and labour and increased costs.
Currently, new-build homes are commanding strong rental premiums as high as 41%, according to research by Unlatch. As new builds provide a superior quality of accommodation, these properties are naturally earning a higher rental value and yield, This is one of the big factors attracting landlords to invest in new builds.
Unlatch analysed market data on rental premiums and yields for new-build homes and how they differ throughout Britain. Across the nation, the average rental value of a new build is 23% higher than existing homes. This shows the new-build rental market is thriving and further illustrates that new properties are better long-term investments.
The North West of England in particular is home to the highest average new-build rental yield with 4.4%, compared to the national average of 3.7%. New builds in this region are providing opportunities for landlords to earn strong monthly returns, which is particularly attractive as many investors have recently seen their yields hit with rising costs and legislation changes.
The benefits of a future-proofed investment
There are additional benefits that come with investing in new-build homes. Running costs are lower as these properties are significantly more energy efficient, allowing tenants and landlords to save on energy bills. This will be particularly important moving forward as energy costs continue to skyrocket.
Newly built properties are also required to meet the latest standards involving quality and safety. The better level of build quality due to modern standards and compliance mean maintenance costs are lower.
Additionally, for landlords with new-build homes, increasing standards will be less of a worry as these properties have been built to the latest standards. This is particularly important as the government announced in the Levelling Up White Paper that all rental properties will soon have to meet a new minimum Decent Homes Standard.
Previously, the government also proposed its plan for higher EPC rating requirements for landlords. These new proposals would require privately rented properties to have a EPC rating of C or higher on new tenancies from 2025 and all tenancies from 2028.
This will likely mean that some investors with less energy efficient properties will have to spend thousands on each of their properties to reach this higher level of energy performance. However, for landlords with new-build homes, EPC ratings are less of a worry.
EPC data shows new flats have a median score of 83 in England and Wales, while new houses have a score of 84. Both of which are within the band B. This means that the majority of new-build homes already meet the minimum requirements that could come into effect in the coming years.
Additionally, this further makes new properties more attractive for property investment. New builds are providing future proofing solutions for landlords and allow investors to invest with more confidence for the future.
Greater Manchester is a growing new-build hotspot
Greater Manchester has become a hotspot for new-build homes with a substantial number of exciting property developments being brought forward to help keep up with the ever-increasing demand for housing in the city region.
Manchester itself had the fifth highest value of new home purchases out of all of the towns and cities in England and Wales during 2021. This amounted to a whopping £56.3m, according to Unlatch’s analysis of property transaction records from the Land Registry.
On top of that, Salford is also setting itself up as a top new-build hotspot. The city is home to the second highest percentage of new builds constructed from 2017 onwards, making up 6.9% of the housing market. This is according to research by MyJobQuote.
Salford also leads the top 10 areas with the highest percentage of new housing with the highest number of total new builds constructed since 2017 with 8,533. And even more new-build homes are currently under construction in the area.
This shows the strong new-build property investment opportunities prevalent across Greater Manchester that are proving to be appealing for a range of landlords and investors.