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Where are the most profitable new-build markets?

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The latest research from Warwick Estates reveals where Britain’s most profitable new-build markets are and, therefore, where developers are best focussing their attention.

Warwick Estates looked at the average cost of constructing a new-build home per square foot across seven major British cities, including the cost of materials, labour, first and second fix costs, a contractor’s margin of 2.5% and preliminary costs of 15%.

Warwick Estates then looked at the total cost of constructing a new home based on the average size in each city comparing it to the market value of a new-build in the current market.

The research shows that on average across these major cities, it costs £139,238 to build a new home, while the average market value is currently £320,515. This is a positive difference of 130%, for developers. 

The most profitable market for new-build homes analysed by Warwick Estates is Edinburgh. It costs an estimated £126,400 to construct a new-build home in the Scottish capital while the average sale price is £375,870 – a 197% profit margin for developers.

London ranks second, with an estimated construction cost of £181,700, while the average new-build home sells for £533,642. A 194% profit margin for developers.

The third most profitable new-build market was Bristol (137%), followed by Leeds (133%), Birmingham (107%), Newcastle (101%) and Manchester (85%).

Glasgow ranked bottom of the table, although, with an average construction cost of £139,238 and an average new-build value of £320,525, the city is still home to a 68% profit margin.

Table shows most British cities that have the largest difference between average new-build construction costs and average new-build house price, listed from largest % difference to smalles
Location Construction cost (sq ft) Property Size (sq ft) Construction cost New-build house price Profit margin (£) Profit margin (%)
Edinburgh £160 790 £126,400 £375,870 £249,470 197%
London £230 790 £181,700 £533,642 £351,942 194%
Bristol £180 790 £142,200 £337,062 £194,862 137%
Leeds £160 790 £126,400 £294,384 £167,984 133%
Birmingham £170 790 £134,300 £278,074 £143,774 107%
Newcastle £170 790 £134,300 £270,117 £135,817 101%
Manchester £170 790 £134,300 £248,997 £114,697 85%
Glasgow £170 790 £134,300 £225,973 £91,673 68%
Average £176 790 £139,238 £320,515 £181,277 130%
Sources – Est. Construction Cost – Propertydata, Average new-build house price: UK HPI
             
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BDC 317 : Jun 2024