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Welcome to Merin Talks Your Money, the personal finance edition of Merin Talks Money. In these bonus podcasts, we talk about the best strategies for making the most of your money. I'm Merindumseet Web Bloomberg UK Wealth Editor at Large and with me as ever senior reporter and author of the Money Distilled newsletter. John Stabeck, Hi.
John hil We are really rattling.
Through this, aren't we. I mean, here we are in episode five already there's almost nothing more to know except for what you're going to find out today. Now before we start listen to.
This, hundreds of new homes up and down the country have been built using weak mortar that does not meet recommended industry standards, and by new we mean newly built. Juliet Says brought a new home listed as being on one of the most expensive estates in England. The company had refused to repair ninety one snagging problems. The gate collapsed, for example, and a coat bottle was found inside a pillar. Tweet from Paul I purchased a new home last December.
I've had multiple problems, mainly drainage. My garden is constantly flooded.
Hearing all those stories slightly reminds me of the conversation we had with Professor Yolanda Barnes in our first episode, remember that about new builds, and particularly about flats and how they're an unknown quantity. You don't quite know what you're getting. You don't know where the chargers are going to go, all that kind of thing. So maybe you're better off trying to buy a house or flat that you know has already stood the test of some time.
At least you know what you're getting when you buy an old house, or maybe you don't know what you're getting.
I don't know.
We need an expert for this, so to help us answer this question, we are today joined by Paula Higgins, who is CEO of the Homeowner's Alliance HOA HOA six A champion the interest of Britain's homeowners. That's an awful lot of us and provide unbiased practical advice. Before this, she spent many years working as a civil silver we might like to hear a bit about that too, and led the previous government's review into building control. Paula, thank you so much for joining us.
Lovely to be here.
Okay, right, we've got quite a lot to get through here. So first, can I just ask you a question You may not know the answer to this orthod off your head, but roughly what percentage of houses that change hands every year were sold every year a new build and what are secondhand?
There's about a million transactions a year, and I'm not sure. I mean, we're sort of running about, you know, we're not meeting the targets for building new build, but there's generally about forty thousand, if we're talking about flats in particular, forty thousand new build flats going on the market every year. But it's the new build is a very small percentage of the overall housing market.
Yeah, I mean I targeted three fifty year or the current target is three fifty a year, right.
That's going to be pretty impossible to make, so hats after them.
Yeah, and I understand that this year we're already running behind last year, so we're not going to make that, but none of less. So, so there are a lot of people out there buying new builds every year. And the statistic that always s turns out to me when I look at this This is a study from a couple of years back suggested that you're buying you build, you walked through the door, and it's instantly worth around fifteen sixteen percent less than it was before you walk
through the door. So if we're looking at old versus new, I would have thought the first thing to look at is if you're only staying there for a short time. If you're looking at buying a house to stay and only for a couple of years, you've got a big
hill to climb or other. The market has a big hill to climb to get you even evens with that depreciation, plus the costs of purchase your stamp duty, and you know your various fees for surveyors, et cetera, which you've talked about before, So that seems to me to be the immediate thing.
It is. It's a big hurdle. So we always say, if you are buying you build, you might want to think about staying there for five years. But that said, you can also offset that new build premium by asking for lots of extras. So you will have developers who will pay for your stamp duty, who will you know, upgrade you know, sort of flooring, sort of fittings, that sort of thing. So they like to keep the price
of the new build high. But actually, if you can get all these extra bits and pieces in there, you might be okay. And the other thing we'd say is that actually, if you want this sort of new build lifestyle living is that look at resale. So you know, if you're finding the property is a couple of years old, then you might be in for a bargain. Really, so you're not paying that new build premium, so.
My second hand new build.
Exactly because the warranties will still be there, so you know, you'll still have the ten year warranty. So it can be you know, a good way to if you want that sort of no hassle free lifestyle you want to move in, you don't have the time to do things up, you don't have the inclination to do that, it might be a good, good move.
So it just took me through. You mean when you say new build lifestyle, well new bill.
So you know, we know that younger homeowners generally like the idea of a new build. Maybe that's because they're a bit inexperienced, but actually there's a really real benefits of people liking to buy new bills, so the energy efficiency will better lower costs. The fact that you can move in, you can put a stamp on your own, you can sort of develop it how you want, so that there is some benefits of that. When you're buying something old, you know, you don't know what the costs
are going to be. You know you might need to replace the roof, but so you've really got to look at, you know, the sort of the whole picture of it. But I would say with new build and what people really need to be aware of, it's not just the structure of the property, whether it's a flat or a house, it's that you've got to look at the charges really carefully because they're estimating these charges, and we know they're
unestimating them. So if you're buying a leasehold property and they're saying service charges will be x a year, that can increase massively. And particularly if you're buying on a new build a state, there's something called estate charges. A lot of these states aren't being adopted by the local authorities, so if you're living in an existing area, you're not
paying for that playground. But if you're living in a new build a state, you might be, and these charges are uncapped and you can't control them.
Okay, Hell, let me take you back a bit there. When you say not adopted by the local council, you mean to these biggest states that you see going up around the place. They have roads in them, they have some park maybe as you say, a playground, they need the rubbish collected, all that kind of thing. If they're not adopted by the local council, I then not pulled into the public services system, all that upkeep and those services have to be paid for external to the council or not.
Not that you still be paying the council tax, so you still get your bins collected and that sort of thing, and you might get you know, sort of basic services. But if you've got like a playground on that new bill distinct, you're probably paying for that in some cases the lighting on that. And then we're really worried because we're seeing that actually maybe the quality is not that good.
So it might be fine for the first few years, but when you go to sell that next buyer the conveyance, you will be saying, well, what are these charges for? And we also know that even if you're not happy with the management it. You can't change your manager. So at least if you're buying a lease whole property and you're not happy with the managing agent, you can. You've got the right to manage and to share a freehold.
But if you're on these are called estate charges. We've got lots of advice in our site.
But who manages the estate? So when you say in a book of flats you have a managing agent and you have some degree of power, particularly if you own a share of freehold or a common hold, you have some degree of power to go after them. But let's say you buy a house on an estate that was built by Barrett Homes or Percimon whatever. Do they continue to manage that estate or does that become disas.
Do they sell it? They sell it to somebody else who will manage that estate, and you have, you know, you've got very weak controls over it. That said, the government is looking to do something about this, and they are consulting on this later in the year. But you know what will happen with the existing estates now and we are campaigning for adoption of all new build estates going forward.
John is looking absolutely horrified. We've never heard of estate management charges.
No, I just want to interupt, as the talking idiot on the podcast here, it's so you're telling me that you can go in buy a new home and what you're basically saying up for is an uncapped liability in timsy and your service course. That's just accitable. Why why would you ever do that? Why would you say, yes, I am definitely going to pay this and your fee.
Okase you don't understand compounding and you don't understand the nature of the present value of an uncapped liability.
And I would say, also, you're being sold the dream. So you're buying a new build, and if you if you're going with the solicitors or the conveyancers that are recommended by the new build developers, you might not be told this. And what they can say is they'll they'll just say, oh, there's a little bit of money, you know, maybe a couple hundred pounds of years for upkeep of the you know, the common grass or whatever. But this can increase and you don't have you can't say, it's
very hard to get to change that managing agent. And with leaseholed properties you can go to the first property tribunal. There's no such mechanism with these estate charges, which is why I think it is like the big scandal. It's called fleecehold. So look it up, shuere But I just I guess.
I mean I was a weird the world issues. I just hadn't a pre season bad. I mean, this is like we're getting on neckers on the twist over like PPI for Carls at the moment. This is so much was this is life ruining. Oh sorry, but anyway.
Well John as well, if you if you're going to go and look at some of the big flats in London, those big new leasehold states where you see, you know, a couple of big blocks of luxury flats going up in central London, and then they had that land around them which is not adopted by the council and has to be kept up to a relatively high standard. And you know, your general public of walking through it and stopping here and stopping there, and you're effectively paying for
a public park in central London. I mean it's extraordinary, right, Sorry, Paula, I'm taking over back to you.
Yeah.
No, and I can say that happened in I think it was Devin, a Dorset where they actually were paying for a big country park next door. So and the council tried to help. They tried to step in and say, look, we will take over the management of it, but we'll charge you for it. And then they were stopped because they couldn't treat some of their you know, their constituents or their you know, the people are living there differently from others. But the people there were delighted because then
the charges were a bit more reasonable. So it is a real problem, and it's something that I think it will become, you know, bigger and bigger in the future, especially as these new build estates. As people are starting to sell, they might find that they find a fewer buyers to be able to buy that.
I'm just so amazing.
Yeah. The other thing I would say is to be aware of it is that if you're buying a leasehold property today, and you build a leasehold property today, the government is also committed to bringing common hold so that will be sort of in a few years time, you'll only be able to buy new common hold properties, which is a generally good thing. There's more control, you won't
have service charges, you have budgets. But if you're buying a lease hold property today a flat in a few years timing, you might be competing with those common hold properties, so you might need to think about switching to a common hold or you might need to price in that differential. So that's another thing to think about if you are looking to buy a new build flat today.
Okay, interesting, Now I'm trying to think of upsides to buying your I've.
Got an upside so far.
We've got as far as maybe they'll chuck in the carpets, which isn't really doing it for me. But the biggest one I can think of is well, you could say, well maybe you can get help to buy, or you can get shared owner shit, but we've been through those. Don't touch them with a bodge pole listener. So here's
the only other thing I can think of. No chain, No chain, You buy direct from whoever's going to rip you off at the house builders, and you get to move in right away and it's not going to collapse.
Yeah that's true. But if you are buying with a mortgage, you might you want to make sure that that delivers on time. But I can give you another upside of buying new build. So if it's the energy Performance Certificate of A or B. You can get a green mortgage. You can get lower mortgage rates. So the best mortgage actually at the moment now is Barkleys, which is under four percent, and you can get cash backs. So there's another upside that you might get a mortgage better mortgage
rate if you're buying a new build. But it is true that if you're you know, there's no chains involved, which is brilliant, but you know, it's very difficult for somebody who's trying to buy and you build, who's relying on a mortgage, which is most of us of course, if it's more than six months in advance, because that mortgage offer will run out and you could be stuck between a really difficult position if you can't renew that offer or get another mortgage offer.
Paula, I think that was an excellent effort with the cheaper mortgage, and I'm I get it well done, my belt, Why would you not just buy one that was a couple of years older, save the save the fifteen sixteen percent and you build premium and take an ordinary mortgage. I mean, if we're after the cheapest option here stuff the green mortgage, mortgage get the lower price.
Yes, no, I would agree. And the good thing is if you're buying something a few years older, you know you'll you'll see you know what you're getting. Because a lot of people, if they're buying and you build, they get they get sort of sucked into the dream. And and we've seen you build estates have been promised schools or GP surgeries or a high street and they don't materialize. And that is really difficult to sow because you're here
just based on marketing brochures. What we always say if you're buying something you build, is make sure you get absolutely everything in writing, so you've got some way of coming back. If you've been promised car parking spots, it's a cul de sac, whatever it is, make sure you get everything in writing.
It seems to me that one of the things that we're really talking about here is the sense of community.
So if you buy an old house, and particularly if you buy one in a in a town or village outskirts, so if you can already see what the community is going to be like, so you can know if you've got a pub, you've got a shop, what kind of other people live in the area, etc. You get some sense of how you're going to live when you buy an older house, whereas when you buy a new house, as you say, you're buying a brochure, not a reality or not a community.
That's true, and it's it's very hard to price that in so you don't know what it's going to be like. You've got no comparables. So if you're buying an older property, you can look on land registry and see what other people are paying for it. You could see if you could do it up, put an extension in a loft conversion, you can add value to it. But if you're buying into a completely new development, there's no comparables to see is that going to increase? And that's where you really
need to do your research properly. Not all developers are the same, you know, you want to see that the developers that maybe hold their resale value. There's a lot to think about.
Actually, was something I wanted to ask about, is you know this ten years guarantee that you get with a new built home, Because in my experience, everything to do with property is the most caveat emptor thing you will ever buy in your life, and there is no comeback. Or in anything at all, So I'm just want to done. That is the guarantee actually both very much.
Yeah, it's it's really limited. So the first two years, you know, the developers should have, you know, do the snags and things like that. And that's why we always say make sure you get a snagging survey. Diorize that two your points, because if you don't get anything fixed before then you might be a bit stuffed because between years two and ten it's structural. So it's really structural stuff, and there's also ways of invalidating, so if you decide to.
We have a situation somebody came to our site they changed the radiators. You know, a young couple bought a new bill. They just wanted to sort of have nicer radiators. They invalidated that warranty when they found out the boiler and there's problems with that. So it is really tricky. So I would say again, you know, make sure you
know you now can get pre completion inspections. And it seems a bit odd that you're buying something you don't expect to get a mechanic to buy a new car to look over it, but in this case we probably did it's not all the same, so it is a bit bonkers.
God, there's so many reasons to loathe house builders. It's insane. Isn't The other thing that I worry about with new bills it's the size of the rooms. And when you look at houses built even up until the fifties, sixties, and particularly even council housing for example, built in the nineteen thirties, the rooms are big and spaceous in light,
et cetera. But when you look at the floor plans of new built you often see really very small floor space, small small rooms, and that seems to me to be something of a concern.
Yeah. No, and they even do things like put in tiny furniture, or they might not have wardrobes in there. You don't have built in wardrobes. And one of the reasons why, because they're building for profits. So and we we market our rooms our houses on based on number of rooms in most other countries of European countries is square footage. So then you could be able to compare you know, a two bed Victorian flat to which might be the same space as a you know, a small
three bed house, So I think it is. And that's where you know, you want more information and we're really much wanting as much information on If you're looking at right Movements Zoo in the property portals, they are actually we did some research earlier this year they're actually doing more on that. So you can look at the floor plans, you can look at the square footage and do the sums yourself. What's the price per square footage you're paying for? This slightly takes us.
Back to use a buying agent who knows all this stuff, not back to we haven't we haven't done that episode.
Yeah, because in other countries you buying agents and estate agents, you know they're working on behalf of the seller. The buyers aren't aware of that. But you know, with the affordability so stretched, buying agents seem to be for the rich and the time pouring cash rich. But yeah, no, and that's why with our site, that's what we try to do. We try to empower people, get them to ask the right questions, you know, making the right choices and avoid the pitfalls of others.
Don't know if Paula, if you would want to discuss this, but obviously you have been within nothing distances the levels of power in the government and I don't know if there's anything from that experience that you would want to see, like how we've ended up here if.
You like, yeah, I mean it's it's interesting because that's why I set up Homeowners' Alliance actually, because I was working in government and housing and I was being approached by you know, some big developers saying, oh, we don't need to do inspections. You know, consumers don't want to, you know, they want to save money. And I couldn't
get a voice of the homeowner. I couldn't go out and ask people say, do you really want, like you know, something to come and inspect the work that you're builder's doing or whatever. So, and that's why I felt there wasn't a voice for the homener and those aspire to own. So we're not just a homeowning club. We're very keen on you know, helping as many people get onto the property ladder. And that's why I set up as to
be this voice. When we first started the first sources of complaints to our site, it was on new build estate agents and leasehold and it still is the case that they come to us because they've got nowhere else to go. So that's why we're here, that's why we exist.
Okay, thank you. Well, I think we've some that up pretty well. I'm going to try and sum up the positives of buying a new build.
Okay, here we go.
Energy efficiency, modern design, be that a good thing or a bad thing, a warranty that may or may not last, common spaces that may or may not long term destroy.
The value of your house.
And finally, no change, no change, and possibly free carpets. So that's new built plus points of older houses. You know what you're getting. You might get some character, bigger floor plans, you might get a bigger garden, and it might even have some plants in it. That seems like a good thing, and you won't lose quite so much money quite so fast, depending on where the market goes. Is that fair? Is that going to cover it?
That covers it? I guess. The only thing with older builds is that you know, you might have lots of maintenance costs. I live in an older property and I'm always shocked at how much things cost when I'm having to do things up. Yeah, but you can also add value with older bills. You can you can increase the value easily.
Okay, So I will just say one last thing, which is that we do live in an older house and when we moved in, here's back to your cost of maintenance. The bathroom ceiling fell down in the kitchen, so you know it's not all upside. Paula, thanks so much for joining us and bringing our expertise to the show.
We really appreciate it.
That's been good fun. Thank you.
Thanks for listening this week's Merren Talk to Your Money. If you like us show, rate, review, and subscribe wherever you listen to podcasts. Also be sure to follow me in John on ex or Twitter at Marinus w and John Underscore Stepic. This episode was produced by Summerside and Moses Andam sound designed by Blake Maple's Special thanks, of course to Paula Higgins. Questions and comments on this show and all our shows are always welcome. Our show email is Meren Money at Bloomberg dot net.