Buying a property in the UK has become significantly more expensive compared to the cost of building one, according to research conducted by Searchland. The study compared the basic costs of construction, including labor and materials, to the prices of new builds. The findings revealed a substantial difference, with the average cost of constructing a new build at £198,000, but the average price to buy reaching £436,000 – a gap of £238,000 or 120.1% more. The South East region has the largest disparity, with a 142.9% difference, followed by London at 142.5%.
More Than Twice the Price
The data shows that the South East, despite having higher-than-average construction costs of £210 per square foot, experiences a significant gap between cost and price. Building a property in the region comes to around £219,000, whereas the average price of a new build stands at £533,000. In London, although the construction cost per square foot is the highest at £240, the average price to buy a new build reaches £608,000, reflecting the elevated property prices in the capital.
Other regions with substantial disparities between construction costs and average house prices are the South West and the East of England, with gaps of 138.8% and 132.8% respectively. In contrast, the North East demonstrates a more modest difference of only 57.8% between the cost of constructing a new build (£177,497) and the typical selling price of £280,012. A similar trend is observed in Yorkshire and the Humber, with a 71.3% gap, and the North West, with a 76.0% divide.
These regions, which also display comparatively lower construction costs per square foot (£170 for Yorkshire and the Humber, £170 for the North East, and £180 for the North West), indicate a more balanced relationship between the cost of construction and property prices.
According to Mitchell Fasanya, co-founder and chief executive of Searchland, the considerable gap between the basic cost of new builds and their actual market prices in England highlights the pressure in the housing market due to supply shortages. Fierce competition and high costs have made properties particularly unaffordable for many in the South, while international buyers contribute to the inflated prices seen in London and its suburbs. As a result, the final selling prices often have little correlation with the underlying costs of labor and materials.
Conclusion:
The research findings from Searchland underline the increasing gap between the cost of constructing a property and the price at which it is sold in the UK. Buying a property has become more expensive, with the average price over double the cost of construction. The South East and London experience the most significant disparities, while other regions demonstrate a more balanced relationship between construction costs and property prices. It is vital for potential investors to consider these findings when evaluating property investment opportunities and assessing the affordability of purchasing a home in different regions.