It is a form of losing money. In the same way, if you put £100 under your bed and came back in 20 years time you'd have lost money - the £100 in a savings account or bank would have earned you interest and over 20 years you'd probably expect your savings total to be worth the same as £100 is now. £100 in 20 years could be the equivalent of £50 now, so that's £50 lost. It's a lost opportunity.
In your example, using your figures - your increase was 19-23% and the region average was effectively 40%. Assuming house A (newbuild) was worth £250k at the start, it increased by 23% and 7 years later it's worth £307,500 now. Assume now house B (old stock, tracking at the region average) was worth £250k at the start, it increased by 40% and 7 years later it's worth £350k.
Now take it 1 step further - in both houses you purchase with £50k in equity (a reasonable and fairly standard 80% LTV), over the 7 years you pay only the interest on the mortgage and make no capital payments. At the end of the 7 years you want to upsize, with house A you have £107,500 to use as a deposit on your next property. With house B you have £140,000 to use as a deposit. Owning house A has 'cost you' £32,500 compared with house B. It makes it harder to move to a bigger property and limits your options.
It's not rhetoric, it's the reason why Jez and other investors would almost never consider a new build as it's a poor way in the short to medium term to invest money. The only time they would is if they build it themselves.
I'll mention again, all of the above puts aside the last 18 months and the next 18 months as Covid is a complete unknown situation to housing prices and stock and we've nothing really to base predictions against at the moment. What I'm talking about is how things generally work outside of a global pandemic (although some of still rings true from what I'm seeing with local sales).
I think you're helping to prove my point with this, pre 2000's houses are expensive for what they offer because they have benefitted from the 40% growth and your previous house didn't. They will likely continue to grow at a much greater rate, meaning the 'expensive for now' approach could (and likely is) going to be financially better over the long term. You would end up in a bigger house with more equity at the end of a long term period. It's a risk v reward game though as you need to balance up the requirement to fund the mortgage.
I'll also add that with a home (somewhere you wish to live, grow old in etc.... not a house, which can be an investment property etc...) the money and figures are only a small part of the story and it's completely understandable that some people like what a new build offers, prefer the design or location of a new build, don't want the maintenance that comes with an older property or just can't find what they want in an older property.
. The boy will get the 3rd floor, which is loft room type, but has it's own shower room, bedroom and sort of landing type area.
