Is it Really More Expensive to Buy New than Old?

Decline in the number of constructions, rise in the price of materials, new ecological standards, VAT The prices of new buildings seem more expensive than old ones. However, this gives access to more guarantees and reduces the costs inherent in the purchase.

Buy in VEFA or Build?

We consider that a dwelling is new when it has been built for less than five years, that it has never been resold, and that it has never been inhabited, or if it is a dwelling formerly having undergone significant structural renovations.

There are two ways to buy new: off-plan or by having your property built. Regarding the Sale in the future state of completion, it is the purchase of a property from a real estate developer who, as project owner, is responsible for the construction of the building. In this case, manufacturer guarantees apply, in particular the ten-year guarantee.

On the other hand, if you decide to build your own house, you will have to take into account the purchase of the land, the design of the dwelling, the construction work, the remuneration of the employees, the connection to the water networks, the sewage, gas, and electricity, but also taxes. Not to mention the repayment of the loan and its interest.

In all, it is necessary to count 15% to 30% more for purchase in the new, compared to the old, for housing of the same size and in the same sector. In this percentage, there is, in particular a VAT of 20% which applies to construction work in new buildings. However, buying new can avoid long-term expenses. Indeed, this type of property will not require renovation work over many years and it has the latest environmental standards in terms of energy, which leads to significant reductions in your energy bill. In addition, thanks to these performances, it will be easier to sell! 

Declining Number of Buildings

However, this price difference cannot be explained solely by a difference in the cost of construction and taxes. In fact, the high prices for new properties are also the result of strong demand that supply is unable to meet. Indeed, according to SeLoger attendance indices, the search for new apartments for rent in financial district nyc has increased by 25% since the first confinement of 2020. However, this increase also applies to the old one, which has also experienced a sharp increase in prices since the health crisis.

But despite the strong demand, the number of constructions is falling, as is the issuance of building permits. A situation on which the French Building Federation (FFB) has been alerting for many months, which is due, according to it, to the latest municipal elections and to the health situation.

Thus, the number of constructions fell by 14.7% in 2020, or 65,000 less, according to figures from the FFB. 381,600 housing units were built in 2020 according to the LPI-SeLoger barometer, while 500,000 should be authorized each year to meet demand. “Current tensions over raw materials and supply to construction sites, the rise in the price of materials and energy are all factors that contribute to inflation in the price of new builds and to the chronic shortfall in the production of new housing in relation to needs”, analyzes Franck Vignaud, Director of the Real Estate Laboratory.

High Environmental Requirements

Another reason for a higher new price: the new RE2020 standard, which reinforces the environmental and energy quality of buildings. Thus, they will be better insulated, consume less energy, resist heat waves, and encourage ecological materials. According to the Department of Housing, Town Planning and Landscapes (DHUP), a house of 90 m², it costs €1,959 per m², excluding land. With the RE2020, the same house would cost 2,025 euros per m².

On the other hand, investing in new will reduce your energy bills in the future and will therefore allow you some savings. In new homes, the maximum energy consumption is 40 kWh/m² per year for heating, production of domestic hot water, air conditioning, and lighting. In the coldest and less sunny regions of France, however, the limit is 65 kWh/m² per year. In addition, the accommodation must have good insulation, for winter, and summer. Finally, the charges and expenses relating to the common areas of condominiums are lower in new buildings. The installations, such as the elevator or the doors, are recent and under warranty. 

Also, Check – Important Features To Consider When Buying A House

Added Value Over the Long Term

As new is more expensive to buy, realizing a capital gain is, in theory, longer and more complicated. But that was before. Indeed, the government’s determination to eradicate energy thieves goes in the direction of buying new. Thus, with the entry into force of the new DPE on July 1, 2021, poorly rated old homes will have a much harder time selling but also renting!  

From 2025, it will be impossible to rent G-rated accommodation, then it will be the turn of F-rated accommodation from 2028 and E-rated accommodation in 2034. Especially since from these dates, these DPEs will become also opposable. The tenant will be able to oblige his landlord to carry out repair work to increase the energy class of his dwelling, where a new dwelling must be placed at the top of the basket, due to the strong environmental requirements which regulate the construction. 

These are all elements that boost purchases of new homes, although more expensive, because resale will be much easier in light of all these new regulations. Proof of this renewed interest: of the 40 cities analyzed by Se Logger, 28 show rising prices for new housing.