Should I buy brand new or established property? There is no right or wrong answer but they do offer distinct differences. In this market insight we share some of the advantages and disadvantages to help you assess what’s right for you.
If you are buying to occupy or invest, its important you understand your circumstances and what you are actually buying in advance.
Buying off the plan:
Buying off the plan is a popular way to purchase all types of residential property.
Advantages:
- Buying off the plan is a great way to purchase a property in today’s prices, but settle it at a future date.
- During the construction phase, buyers can continue to save fund to contribute to their purchase.
- You only have to pay up to a 10% deposit with the remaining 90% paid at settlement This slightly differs with house and land packages which involves a construction loan once the land settles.
- As the property will be brand new at completion, investors will maximise their depreciation entitlement.
- You get a property inspection prior to settlement or key handover.
- Brand new builds generally offer a 3 month defect period after settlement.
- You’ll have a structural warranty on the build.
- The fixture and fittings will also come with a product providers warranty.
- You will have the opportunity to design or change a floor plan tailored to your needs.
- They offer modern fixture and fittings, including new open floor plan designs.
- Depending on the type of buyer you are, you may be entitled to stamp duty concessions.
Disadvantages:
- Buying off the plan generally costs more to own a brand new property in comparison to an older one.
- If the property market encounters a short term downfall, this means you may be paying more than that market valuation.
- In some cases, the estimated timeframes provided by the builder or developer can encounter construction delays.
- The contract of sale requires you to purchase the property at settlement. As it is a medium to long term settlement, it’s difficult to get a valuation or finance clause upfront.
- As you are bound to meet the settlement, your financial and personal circumstances may change.
Brand new completed properties:
Having the ability to see, feel and touch a brand new home is inspiring and motivating for buyers.
Advantages:
- You have the opportunity to inspect the property before you buy.
- As the property is brand new, investors will maximise their depreciation entitlement.
- Newer properties offer modern fixture and fittings, including new open floor plan designs.
- A brand new completed property generally requires less repairs and maintenance.
- Brand new builds generally offer a 3 month defect period after settlement.
- You’ll have a structural warranty on the build.
- The fixture and fittings will also come with a product providers warranty.
- You can approach the purchase with a valuation and/or finance clause upfront.
Disadvantages:
- Most new properties cost more than both off the plan and second hand. Developer’s often increase the cost of the property once it’s finished. The fact buyers have the chance to inspect the home, the developer is possibly paying a loan to keep it and may need to furnish it, the price is often raised.
- Depending on the type of buyer you are, you are likely to pay full stamp duty on top of the purchase price.
Second hand or established properties:
Buying brand new or established property has some similarities, buy second hand offers you a great level of supply to choose a location that’s right for you.
Advantages:
- There’s no limit to location. If you have the right affordability, you’ll have greater supply to choose from.
- You may be in a better position to negotiate on price. This is much easier in comparison to negotiating with a professional developer who may be worth a lot of money.
- A second hand used property is generally going to be cheaper than an off the plan or brand new one.
Disadvantages:
- A vendor may hide various defects or issues in the home. This can be done by placing a picture on a wall or painting over something.
- As its second hand, the property will have some wear and tear. In these instances, you’ll need to pay more for the upkeep of the property in comparison to an off the plan or a brand new property.
- Older homes may encounter structural issues, which may cost a significant amount to fix.
- The older the property, the less likely there is any tax depreciation entitlement for investors.
- If a property needs capital improvements or renovations, you’ll need to obtain council approval.
Summary
Should you buy brand new or established property? Every property needs to be addressed case-by-case. You need to weigh the property on its own merits, whilst measuring it against your personal circumstances, goals and objectives.
With so many options it makes sense to seek professional advice to help filter what’s right for you. At Crest Property Investments, we specialise in sourcing off the plan and brand new properties for buyers. If you’d like a free consultation with one of our property advisers, please feel free to contact us. We welcome the opportunity to assist.
November 2021
While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you want to learn more please contact us. We welcome the opportunity to assist you.
