New build v period property

24 April 2010, Buy Association

By Camilla Dell

What makes a safer investment – new build v period property?

The question of what makes the best kind of investment is one that we are regularly asked by our clients – both domestic and overseas. In general our clients are inclined to favour new build on the basis that this is a style they are both familiar and comfortable with. They like the fact that everything is new and is therefore likely to be low maintenance and are sometimes also inclined to buy off plan, on the basis that prices could well increase as the development nears completion.

Proceed with care…

We are not averse to investing in new build property but always caution our clients to proceed with care. Statistics show that over the years and the changing property markets, it is the older, period style properties which have appreciated most in value. This is often due to the critical issue of location. Many new build developments, specifically in London, are located in less sought after areas such as Canary Wharf and the south side of the River Thames. When the market deteriorates, these developments traditionally get hit worse because of their location and the high density of units.

Location is the key to successful investment…

At Black Brick, we tend to advise our clients to buy for investment in prime central London locations such as Chelsea, Kensington, Hyde Park and Regent’s Park. Whilst it is accepted that you will get less space for your money, it is also true that the potential for capital appreciation is higher and there tends to me more regular and constant tenant demand for properties in these popular addresses. The infrastructure is so established with a wide choice of cafes, restaurants, cinemas and galleries…as well as good schools and transport links and plenty of green space.

Rental Yields…

Rental returns can often suffer in new build developments where there is a high density of units available at any one time which in turn forces rents to come down. If we look back over the years, it is the prime London post codes that have appreciated most in value when the market booms and even in more troubled times, there is less depreciation in values. At Imperial Wharf – a new build riverside development in Fulham consisting of a range of studio, one, two, three and four bedroom apartments and penthouses set within 10—acres of landscaped parkland, courtyards and gardens, there was a great deal of activity specifically from overseas investors during the boom period of 07/08. At that time, prices were achieving £1000 per sq foot but in the past 12 months, prices have dropped by 20% and unlike in prime central London , where prices are now just 4% below peak levels, have shown little or no signs of recovery. This is a good example of the problems which arrive where you have a combination of high density new build in less central locations.

Of course there have been some very real success stories in the world of new build, notably at The Knightsbridge Apartments where properties continue to sell at a premium but we believe this is largely because all the ingredients are in place. Namely quality of product and crucially… location.

Location Location Location…

This will always be the key to successful property investment. Everything from post code to the best side of the road or square is relevant and these ‘small’ details can often be missed. Taking advice from an independent buying agent will ensure you are well informed and fully understand the investment you are about to make.

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