The research published by property search engine Propcision showed that home buyers in London could be paying as much as £125,000 more for a newly-constructed home compared to an established property.
While a 20% premium on new-build properties is seen as the industry norm, the findings indicated that a homebuyer is actually paying an extra 35% to 60% cost for these properties.
Propcision co-founder Michelle Ricci said the current pricing of many new builds was ‘simply not sustainable’.
“With this premium pricing, home buyers in London risk being trapped in a new build unable to move on without incurring losses. The sting becomes more painful when incorporating the sometimes-hefty yearly service charges.
“It appears the price spiral is an unintended consequence of the new Help to Buy legislation,” she added.
Propcision collected its findings of new-build properties within London boroughs by calculating the price per-square foot unit.
In Croydon’s Saffron Square, it found that a buyer purchasing a new development would pay an average of £670 per square foot through The Berkeley Group, a registered Help to Buy developer, which is 60% more than the overall asking price of Croydon.
The research found the same pattern in Lewisham’s Renaissance development, built by Barratt Homes which is also registered with the Help to Buy scheme.
A family purchasing a small two bedroom flat of around 580 sq ft in the development would be set back around £475,000, while the family would save more than £125,000 by purchasing an existing flat of the same size.
“By taking the price for each square foot of a property, consumers can use this bitesize unit to spot differences in pricing. They can then rationalise if it is worth paying a bit more, per square foot for one property over another. Perhaps one property has a better view, better location, is newly-renovated, or has a garden or outdoor space – all factors that contribute to the rationalisation of paying more for something better,” she added.
“Even so, such significant price differences for new-builds are hard to justify when you analyse the comparisons.”
