When buying a car, television or washing machine, new is usually better. But when it comes to buying a house or apartment – can you draw the same conclusion?
There are certain advantages and risks to be aware of when buying both old and new property. Check out the pros and cons.
Choosing old property
Mark Erichiello, Buyer’s Agent and Director at Master Advocates Real Estate Services, has being buying and selling real estate in Melbourne since 2000. He says his best results have come from investing in established property.
“My preference to established is more so because I can compare and physically inspect the property, not just in terms of fixtures and fittings, but I can compare with other properties on the market,” he says.
Comparable in the marketplace
- Ability to physically inspect the property
- Comparables in the market – other similar sold properties – can generally give you an estimate of the property’s value.
Structure and aesthetic
- Many established homes have stood the test of time structurally and aesthetically
- Period homes have a large following from buyers, renters and investors.
Value add opportunities
- Builders and developers can try to maximise land value by sub-dividing
- Investors can breath new life into property by renovating, potentially increasing profitability.
Choosing new property
Darryl Simms, Property Investment Specialist at Latte Property, is in favour of buying new for the potential savings, tax depreciation and added luxury it can afford.
“For investors there are much larger tax depreciation benefits (for new homes) which reduce the holding costs of your investment property,” Simms says.
“In Victoria, you could potentially save over $18,700 (in stamp duty) on a $500,000 purchase by choosing to buy a new property off-the-plan instead of an established home,” Simms says.
Incentives and deals
- For investors, tax depreciation benefits could reduce the holding costs of your property
- Significant stamp duty benefits that could mean $1000s in savings.
Built for modern living
- New properties are generally lower maintenence
- Low energy ratings make them cheaper to run, reducing ongoing costs
- Luxuries such as swimming pools, ensuite bathrooms and theatre rooms are often included, which can be costly to add into an existing property.
Unique and boutique
- While bigger estates and high-rise developments can take longer to pay-off, small sub-divided areas in established suburbs could have good immediate capital growth potential
- Look for unique, boutique developments in low supply areas.
Risks & tips: Old property
Erichiello says while established properties can be easier to predict in terms of growth potential, there can be risks and hidden costs if you don’t do your homework.
He recommends enlisting the help of building inspectors, surveyors and solicitors specialising in property – “before you even begin to talk money” – to avoid nasty surprises later on.
- Older properties can have structural issues, so talk to a building inspector before you sign anything
- If you need more work to get the house in working order, a building inspection may give you room to negotiate.
- Easements or caveats on the title may affect your plans for the property
- Check ownership on title and vendor warranties to make sure everything goes smoothly on settlement day
- Enlist a solicitor that specialises in property to provide you with an independent pre-purchase contract review
- Renovating or sub-dividing? Consult with council and building surveyors to make sure your plans are valid.
- Emotional buyers can drive up property prices at auction
Risks & tips: New property
When buying new it comes down to doing your homework. If investing, you need to know where there’s likely to be a limited supply. If you’re planning to occupy, make sure you get a solicitor to thoroughly check the contracts of sale to ensure you’re not at risk of delays.
“If you’re looking to buy brand new and occupy, and you trust the builder – then it could work for you,” Erichiello says.
“You can get excited by deals and the initial savings of getting a brand new place, but always do your homework to minimise risks.”
- Similar properties in the same area, far from the city may be slow to grow in value
- Apartment blocks in a recently zoned area could be in over-supply and potentially difficult to rent out
- Be careful of growth corridors if investing – you could be waiting a while for capital gains.
Possible delays or extra costs
- Risk of delays in handing over the finished product and possible variances in price
- Get a solicitor to check the sale contracts of new properties
- Choose developers carefully and run background checks on associated parties.
Whether buying old or new, buyers should try not to be seduced by up-front savings or emotional attachments.
“It’s more about selecting the right property and location that is low maintenance in cost and labour without hidden surprises, and has more opportunity for capital growth and rental yield potential,” says Erichiello.
For any real estate need either Buying or Selling or Investing , contact me either via email or phone given below.