Are homebuyers, property investors and tenants driving demand for new-builds in the US and UK housing markets?
Across the US and UK, building levels have been falling short of population growth, so there’s ongoing demand for more housing, particularly in certain locations. The development of new-builds can help close the gap in supply and demand.
Brand-new housing is also more appealing properties for many buyers as they come with a number of advantages. Landlords can gain from investing in new-builds, particularly as tenants are increasingly looking for energy efficient properties and often discount homes where EPC ratings are too low.
New-builds can come with a higher price tag. In the UK in particular, this can be between 10-20%. However, this is not always the case and can often depend on a number of things such as property type and location.
New apartments filling up slowly in the US
Currently, there are more new apartments hitting the US housing market than normal. But less than half of newly built apartments that were completed in the fourth quarter of 2023 were rented within three months, according to a new report from Redfin.
This is down from 60% a year prior and is the lowest seasonally-adjusted figure on record besides the first quarter of 2020 when the onset of the COVID-19 pandemic brought the property market to a halt.
In the fourth quarter last year, there were 90,260 new apartments built in the US. This is the second highest number in records dating back to 2012. Over the last three quarters, the rental vacancy rate has also remained at 6.6%, which is the highest rate since 2021.
Apartment builders have slowed down on the number of projects they’re starting. However, completions are still near their record high as there are so many construction projects that kicked off during the pandemic that are just now being completed.
In the rental market, small newly built apartments, including studios and one-bedrooms, have recorded the biggest decline in rent. This is largely due to supply having surged for these types of properties.
In the US, apartment construction tends to be built more for single people as many builders are deterred from focusing on properties for families.
Demand remains strong for UK new-build housing
In the UK housing market, demand for buying new-builds has remained strong. A survey by Knight Frank revealed a fifth of property buyers and investors said they were looking for a new-build property. This is a 13% increase compared with three consecutive prior years.
In the survey, several benefits were noticed with the top one being the fact that new-build homes are more energy efficient. This was a plus-point highlighted by over 60% of those who said they were interested in investing in a brand-new home.
Not having a seller chain was the second most common answer as to why people were more keen to buy a new-build. About a third of respondents then said having more input into the design of a home when purchasing it off-plan was a top advantage to looking at new-builds.
Investing in new-build properties can be an effective way to future proof as well, particularly as the savings that can be made on energy bills are a huge benefit. And new-builds are often popular among modern tenants too.
With demand still outweighing supply in the UK housing market, housebuilding is set to be top of the agenda for the newly elected Labour party. For example, compulsory housebuilding targets will be reintroduced, which is expected to draw more investment domestically and internationally to the property sector.
If you are an overseas property investor looking for a new-build opportunity in one of the UK’s top-performing locations, including off-plan options, get in touch with BuyAssociation.
