According to the latest Land Registry figures, the average UK house price now stands at £232,710, a rise of 0.7% compared to last year.
While there are numerous factors that affect house prices, there are some that have a bigger impact on the amount you’ll pay for a property than others. Here are three reasons why you could end up paying a premium for your next home.
It’s near a good school
Living in the catchment area of a good school can result in you paying a premium of up to £100,000 according to recent research by price comparison website Confused.com.
The study found that English house prices in areas where schools are rated ‘outstanding’ by Ofsted average £331,605 – almost £100,000 more than the UK’s average property price.
This premium is around £38,600 more than the average price of homes in the catchment area of schools rated ‘good’ by Ofsted, about £78,000 more than areas with schools that ‘require improvement’ and nearly £100,000 more than postcodes with schools rated ‘inadequate’.
A spokesperson for Confused.com, said: “Buying a home near a good school is something parents start thinking about years before the time comes. But what they might not realise is how much this is going to cost them.
“We found that those looking to move near a school with an ‘Outstanding’ Ofsted rating could be paying almost £40,000 more than those rated ‘Good’, on average.”
It has good transport links
If you want to live in a home with good public transport links, then you can also expect to pay more for the property.
That’s the conclusion of research by Nationwide which has found that homebuyers in London, Manchester and Glasgow are willing to pay more to be within 1,000 metres of a railway station.
It’s perhaps no surprise that homebuyers in London are prepared to pay the most to be close to a train or tube station. The building society’s House Price Index found that buyers in the capital are prepared to pay an extra 9.4% to be within 500 metres of a station, which equates to £42,900 on the price of an average home.
The research also found that Londoners will pay an additional 4.1% (around £18,800) to be within a kilometre of a station.
House buyers are also prepared to pay a premium for good transport links elsewhere in the UK.
Nationwide found that people buying homes in Manchester are prepared to pay an additional 7.8% – around £12,600 based on the average prices in the region – to be within 500 metres of a railway station and 3.3% (around £5,300) to be within a kilometre.
It is a similar story in Glasgow, where homebuyers are prepared to pay 3.8% more (approximately £5,700) to be within 500 metres of a train station, and 1.7% (around £2,500) to be within a kilometre.
Robert Gardener, Nationwide’s Chief Economist, said: “We recently updated our research on how the proximity to either a tube, tram or railway station impacted property prices in London, Manchester and Glasgow, after taking account of other property characteristics, such as property type, number of bedrooms and local neighbourhood type.
“Perhaps unsurprisingly, London homebuyers appear willing to pay a greater premium for being close to a station, compared with those in Greater Manchester and Glasgow.
“London also has the densest network of stations and services, with 94% of properties within 1.5km of a station compared with 72% in Glasgow and 70% in Greater Manchester.”
It’s a new-build property
If you’re buying a brand-new property than you can expect to pay more than for an equivalent ‘second-hand’ home. A builder will charge a premium for several reasons:
- The property is ready to move into
- Everything in the property is new and unused
- You’ll typically benefit from a guarantee
- The property is likely to be more energy-efficient than older homes
So how much is the new-build premium?
A report in 2016 found that buyers typically paid a premium of 17% for a brand-new home when compared to similar second-hand properties locally.
In 2018, the monthly house price index from LCPAca revealed that the average price of a new-build home across England and Wales had reached £338,694, meaning that buyers were paying 15.8% more than buying an existing property.
The research from Countrywide also found that smaller developments (those with less than ten homes) tend to carry the largest premiums. Over the last five years, new homes in developments of fewer than ten properties have carried an average premium of 20% compared to existing homes in the surrounding area.
One positive factor in paying a premium for a new-build home is that you may still benefit from this uplift when you come to sell your home.
The amount of this premium will depend on how both the property and the wider development have aged. The Countrywide report found that when the average new home is sold on for the first time, you can expect to achieve half of the premium you paid when you bought it brand new.
However, around a quarter of new homes (generally the properties in the very best developments) are able to hold on to their new-build premium for life.
You may also benefit from a higher premium when you come to sell your new-build home if you bought in a smaller development. This is because small developments avoid competition from later phases of the same scheme.
Builders of bigger schemes often find their new homes competing with almost identical ones being sold by sellers who bought into the first phase.