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Property investors prepare for economic downturn…

PUBLISHED ON: 24/10/2022

Property investors have benefited from the rise in value of new-build homes over the last decade. However, with analysts forecasting an economic downturn, they are now considering safeguarding themselves from uncertainty.

Alliance Fund has analysed the value of newly built properties over the past decade in the UK property market, and how the price of a new-build home compares to the existing market stock.

Research indicates that even after the inflation adjustment, growth in new-build properties has increased by 22.1% over the last year, reaching 62.4% in the past decade.

According to Alliance Fund, ten years ago the average price premium of new-build houses was 21.2% above the average cost of an existing property. At present, the price premium for new-build houses is 37.3%, which means that the gap between new-build and the existing market has widened by 16.1%.

However, there is some evidence that the growth rate is slowing down due to rising costs of living and mortgage funders reducing the number of products available to homebuyers. For property investors, this may be a cause for concern, with experts claiming that this will reduce housing demand and lower house prices.

This is one of the challenges in the new-build sector, where the value of property is vulnerable to the economy and can decline during periods of uncertainty.

In the UK property market with fewer buyers and more renters, it may be important for property investors to seize the opportunity to shift more towards the rental market. Doing so will allow for consistent cash flow and the avoidance of a heavy capital gains tax bill.


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