Here are the pros and cons of buying both old and new property:
Buying old property
Investing in established property usually pays off because you can compare and physically inspect the property, not just the fixtures and fittings but with other properties on the market as well.
Structures and aesthetics
- A lot of old properties are guaranteed to be sound structurally and aesthetically.
- Period homes are popular to many buyers, renters and investors.
Comparable in the market
- You can physically inspect the property
- You can compare the properties with other similar sold properties, allowing you to come up with an estimate of the value of the property.
Value add opportunities
- Developers and builders can sub-divide in an effort to maximise land value
- Investors can renovate to bring new life to property and potentially raising its profitability
Buying new property
Investors buying new property can enjoy huge savings, tax depreciation and added luxury it can offer.
New homes come with much larger tax depreciation benefits, which would allow investors to cut down the holding costs of their investment property.
For example, in New South Wales, an investor could potentially save more by buying a new property off the plan rather than an old home. On new homes that are worth $550,000 and concessions for those valued between that and $650,000, the New South Wales First Home-New Home scheme offers an exemption to stamp duty fees.
Deals and incentives
- Tax depreciation benefits can lower the property’s holding costs
- Savings reaching in the $1000s from huge stamp duty benefits
Constructed for modern lifestyles
- New homes typically need less maintenance
- They are cheaper to run, lowering ongoing expenses, thanks to their low energy ratings
- They often feature luxuries such as swimming pools, ensuite bathrooms and theatre rooms. These can be expensive when added to an established property.
Unique and boutique
- Return on investment can take longer for larger properties and high-rise properties, but good immediate capital growth potential is easy achievable for small sub-divided areas in established suburbs.
- Search for unique, boutique properties in low supply locations.
Old property: risks and tips
The growth potential of established can be easier to predict but not doing your homework can open you to certain risks and hidden costs.
To avoid nasty surprises later on, hire building inspectors, surveyors and solicitors/conveyancers specialising in property.
- Structural problems can be found in older homes, so consult with a building inspector before deciding to buy.
- If more work is required to give the property you are eyeing in working order, a building inspection might provide you an advantage in negotiation.
Easements / caveats
- Your plans for the property may be affected by easements or caveats on the title.
- Ensure everything goes without a hitch on settlement day by checking ownership on title and vendor warranties.
- Get an independent pre-purchase contract review from a solicitor or conveyancer who specialises in property.
- Meet with council and building surveyors before renovating or sub-dividing to ensure your plans are legal.
- Property prices at auction can increase because of emotional buyers.
New property: risks and tips
Doing your homework is essential when buying new. For investors, it is important to find out the areas where there is a good chance of a limited supply. If you’re a prospective homeowner, hire a solicitor to extensively review the contracts of sale to make sure you are not exposed to delays.
- Growth in value may be slow in similar properties in the same area, far from the city.
- There could be a glut of apartments built in newly zoned location, which could make them hard to rent out.
- If investing, be wary of growth corridors as it could take a while for you to see capital gains.
Potential added costs or delays
- Delays are possible in the delivery of the finished product and likelihood of inconsistency in price.
- Check the sale contractors of new homes by enlisting the services of a solicitor.
- Pick developers wisely and do background checks on related parties.
Purchasing new or old in the current market
The market was on the rise in 2015, making it hard not to overpay. The market is starting to correct in some areas of Newcastle, so there may be more opportunities for buyers who got left out last year – for both new and established properties.
Old properties were really big in auctions last year; it was a little difficult not to take risks and I did hear some stories of buyers accepting the sellers pest and building report instead of getting their own. It makes sense to insist on your own building inspections report before you sign anything regardless of the method of the purchase.
If a building inspection discovers $50,000 worth of problems in a property that you want to purchase, then you may have more room to negotiate on price, as you are basing the price on fact, not on what you want to pay..
Thorough research, knowledge and expertise are needed to make sure you purchase the right property in the right area to maximise your capital growth potential and/or rental return.
Whether you are purchasing new or old property, don’t be swayed by upfront savings or emotional attachments. Choose the right property and area that is low maintenance in labour and costs with no hidden surprises. These properties offer more opportunity for capital growth and rental income.
And finally, always talk with your agent about everything. The more they know the better they will be able to assist you.