FICTION
Deciding to become an absentee landlord from overseas is a big decision. We’ve met many expats who’ve found themselves drawn to the brand new London riverside developments because they think it’s a trouble-free solution, and it’s easier to buy a new property off-plan than travelling to the UK to view and vet older properties.
But new builds are not everyone’s cup of tea, and they certainly don’t come without their drawbacks. Here are some of the reasons why considering an established property can be a better bet:
- New builds command a premium
New builds can be as much as 10% to 30% more than an older equivalent. A bit like buying a new car – as soon as it’s not brand new anymore, you run the risk of negative equity.
- It’s easier to finance established properties
If you require finance for your property investment you may find that lenders won’t offer on new builds until 6 months after you have owned them. This is because they are worried about the re-sale value of these homes, and may even down value the property (supporting #1 above).
- New builds flood the market
When a new development is signed off and released for contract completion, what tends to happen is that a large number of apartments suddenly flood the rental market. As a landlord, you either have to take a hit on the amount of rent you can charge, or you have to accept that the property may lie empty for a while.
- Space, or lack of!
London properties are not known for being spacious, but a survey by the Royal Institute of British Architects found that the average new home in England is only 92% of the recommended minimum size. Not only are rooms smaller than their older equivalents, builders often over-look storage space such as cupboards and kitchen storage. This is easy to miss when buying off-plan, but tenants will be quick to spot it.
5. No room to grow
It may not be your intention to develop your property, but wouldn’t it be nice to have the option, just in case you change your mind in the future? A typical London maisonette can offer you the chance to extend into the garden, or into the loft space. Adding an extra bedroom can add £150,000 to the value of some properties in London.
6.Quality and finish
New builds come with a 10-year NHBC guarantee, which protects you from any structural issues that may occur. However, it doesn’t protect you from poor workmanship and quality, and developers are notoriously bad at fixing snagging problems. This can be very frustrating for overseas landlords, as usually these issues are raised by their tenants after moving in. The ‘trouble-free’ option can prove to be more troublesome than you think.
7. Monthly service charges
Many new landlords don’t realise that they are responsible for paying any monthly service charges. New build apartments tend to come with high charges, especially if they operate a concierge and gym facility.
An example
MPC recently bought a two-bedroom apartment in South West London for a client. They paid £450,000 for a two-bedroom ground floor maisonette with the potential to extend into the garden. It’s in Zone 3 London, and within 5 minute’s walking distance of the tube. What’s interesting is that two or three new-build developments have sprung up in this area. Doing a quick search, we found a two-bedroom apartment in the same area with no garden, on the market for £550,000. It boasts two bathrooms, but the internal size of the property is actually very similar to the older flat, which also has a garden.
Older properties can be a trouble-free option
If you’re an expat we would urge you not to feel restricted by new developments. Companies like My Property Consultant can offer you a reliable and trustworthy service, finding you the right property in the right location, without you having to pay over the odds for it. Admittedly we charge a fee, but that more than pays for itself when you take into account how much less you will spend on the property in the first place, and the fact that you are less likely to have rental voids.
We can look after every detail of the purchase for you, as well as the ongoing management of the property, so we build a long term client relationship, rather than leaving you in the lurch like a new-build sales team will.