The areas where new builds outstrip their construction cost

New research has found that it costs over twice as much to buy a property than to build one in England, suggesting house prices are being fired up well beyond their natural level.

Related topics:  Construction,  Property,  New build
Property | Reporter
5th September 2023
house construction
"While it’s less of an issue up North, in the South the costs involved and high competition have pushed prices out of reach of many"

The latest analysis from development site sourcing specialists, Searchland, found that typical new builds cost 120.1% more than the price of construction, with construction costing £198,000 and new build prices averaging at £436,000, a chasm of £238,000.

South East sees the biggest premium

The South East has the biggest deferential, where it costs £219,000 to build a property and an average of £533,000 to buy a new build, a huge difference of 142.9%.

This is despite the region having higher than average construction costs of £210 per square foot.

It’s a similar story in London, where it costs £251,000 to build a home compared to a new build average price of £608,000, a huge difference of 142.5%.

The capital has the highest construction cost of £240 per square foot, but that’s small compared to the huge difference between property prices in London and much of the rest of England.

Other areas with a big gap between the cost of construction and house prices are the South West (138.8%) and the East of England (132.8%).

The North - where construction is closer to new builds

There’s a closer relationship between the cost of constructing a new build and the end product in the North of England.

In the North East, there’s a difference of only 57.8% between the construction cost of £177,497 and the typical new build price of £280,012.

There’s similarly just a 71.3% gap in Yorkshire and the Humber and a 76.0% divide in the North West.

These regions are also cheaper than most in terms of construction cost per square foot, with Yorkshire and the Humber and the North East coming to £170, and the North West costing a little more at £180.

Co-founder and CEO of Searchland, Mitchell Fasanya, commented: “The wide gap between the basic cost of new builds and actually building one in England highlights how supply shortages have fired up the housing market.

"While it’s less of an issue up North, in the South the costs involved and high competition have pushed prices out of reach of many.

"London and its suburbs are also fuelled by interest from international buyers, meaning the final price has little relationship to underlying labour and material costs.

"With housing secretary Michael Gove talking up loosening building restrictions on brownfield sites, clearly it makes sense to create new supply to ease this gap between supply and demand, bringing new builds and house building costs closer together for the benefit of new buyers.”

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