If you’re a first-time home buyer you may wonder if you should be looking at new properties for sale or older properties for sale. Even as a seasoned home buyer, you might wonder whether a new or old property is the best investment.
When it comes to purchasing new builds or old homes, there are both pros and cons to consider. You’ll have to determine what will suite you and your family best based on the benefits and risks. Here are a few of them.
Pros and Cons of Buying Old Property
Many people love older properties, because they’re located in well-established neighbourhoods and they’re full of charm, old character, and history. Others also prefer to purchase an established property, as opposed to a new construction, because they can physically see the home before they agree to buy it. When purchasing an older property, however, there are both pros and cons.
The pros of purchasing an older home:
- You can physically inspect the property as opposed to when you buy off-plan
- Market comparables give you a good idea of the property’s value
- Structurally, you’re able to see that the property is withstanding the test of time
- Aesthetically older homes have a lot of character
- Buyers, renters, and investors typically love period homes with charm
- Location in a well-established neighbourhood
The cons of purchasing an older home:
- In the same way you can see the structural soundness of an older home that withstood the test of time, many also have significant structural issues that can be risky or incredibly expensive to correct
- Caveats or easements on the title can impact your plans for the property
- If buying on auction, buyers may drive up the price much higher than the property is worth or higher than will yield a healthy profit even after renovations
If you’re thinking of purchasing an old property, we suggest you ask a contractor or building inspector for assistance in determining the condition of the property and whether there are any significant issues that will require a large capital outlay. Inspections should be done before you even begin to talk money to ensure that you don’t face any unforeseen and costly surprises.
Often when buying on auction, there isn’t time for inspections or inspections aren’t allowed. In that instance, you should still drive by the property to see the area and the condition of the exterior, so you can make a more well-informed bid.
We also suggest you drive around the area. Are there multiple homes for sale that may be a cause for worry? Look around with an inquisitive and questioning eye.
Pros and Cons of Buying New Properties
Many investors and specialists prefer to buy new property due to the potential savings, tax depreciation benefits, and added luxury one may get in a newer development.
Investors receive much larger tax depreciation benefits on new homes, which reduce their holding costs. When buying a property off-plan as opposed to purchasing an established home, the potential savings alone in stamp duty can be thousands of dollars. If you’re buying real estate in Victoria, you could potentially save $18,700 in stamp duty on a property costing $500,000.
For excellent potential capital growth, you should look for boutique developments in low supply areas.
The Pros of purchasing new properties:
- Significant cost savings, including tax depreciation benefits and lower stamp duty
- Generally lower maintenance costs
- Generally lower energy rates, which reduces ongoing costs
- New amenities, features, and luxuries, such as: swimming pool, new appliances, ensuite bathrooms, theatre room, etc.
- Excellent capital growth potential in certain areas
The cons of purchasing new properties:
- Risk of build delays
- Potential untrustworthy builders
- Unpredictable growth, which could mean underpopulated area and slow growth in capital gains
- Potential over-supply, which makes it difficult to rent or resell
If you’re purchasing new property, you should do your homework. Look into the area to see if it’s taking off or looks like it’s going to be slow growing. If you’re buying as an investment, make sure you’re purchasing in an area where there is limited supply.
If you’re looking to purchase a home to occupy, have a solicitor thoroughly check the contract to ensure you aren’t at risk for build delays and can occupy the property when you plan to.
You should also do your homework on the builder or developer. You want to purchase from
a reputable developer who is known for exceptional building quality. You don’t want to move in only to find significant structural problems or issues due to inexperienced work.
In today’s market, purchasing older properties may give you more room to negotiate price. Regardless, it takes proper research and guided advice to ensure you purchase the right property to suit your needs. Whether you’re buying new or old, try to leave your emotions at the door, do your homework, and enlist the help of professionals when necessary.
For additional guidance, check out our post “5 Proven Tips to Make a Good Purchase in 2016.”
If you have questions about purchasing a new or older property, contact us to speak to a qualified real estate agent. We’d be happy to offer advice and guidance.
You can also check out our blog for more helpful tips and information.