Whether to buy an existing property or brand new depends on your financial circumstances. The decision is often also influenced by your eligibility for Government or first home buyer grants. We asked CRAIG WILSON, CEO of PiC Group, to highlight some of the differences to consider when making the choice between purchasing an existing or brand new property.
The age-old debate when it comes to buying property – is one better than the other.
The short answer is no…but there are things to consider.
Buying an existing property
Second-hand properties are readily available, so the market can be bigger – giving you more options. The areas they are in are established, with all the infrastructure already in place and these types of properties are usually somewhat closer to major town centres which brings confidence.
They come with a lot of comparable sales to support the sale price and you can buy it below replacement costs.
Another thing to keep in mind is the value-add potential is much higher on a second-hand property. If you are handy and looking for a project you can buy something to renovate and add value to it by creatinge another room, adding a balcony etc. etc.
They can offer a cheaper entry point for first home buyers, especially when buying into the unit market.
The pros and cons
In my opinion, the main downside is, maintenance, no depreciation, and time cost in maintenance. This might not sound like much but let’s break it down.
You buy an older property that needs a bit of ‘work’ and as time passes things need to be fixed or replaced. With that being said, as most of the appliances in the house are older there is little to no depreciation you can claim come tax time.
Time is a big thing that a lot of homeowners don’t consider – we all live busy lives, and sometimes we can’t dedicate the time required to renovate a property.
One last thing – currently there are no Government incentives to buy a second-hand property which is a deal breaker for some people when it comes to buying.
Buying a new property
Now let’s talk about new properties and their benefits which are almost the opposite to second-hand.
They are in less supply these days, but you still can find them – you just have to be prepared to extend the suburb range a little further out from major cities and towns.
With these being in newer areas, getting finance it can be a little harder as there are not as many comparable resales to go by for valuations. But don’t let that stop you!
A good mortgage and finance broker will be able to help you navigate through this part.
Whilst thinking about funding this project, being brand new there are some Government incentives which can be a real plus for you.
The pros and cons
With brand new properties, all appliances come with warrantees and tax benefits when it comes to depreciation. So, this can be added back into your tax return come the end of the year, but best discussed with your Accountant.
Time spent maintaining a new property is almost non-existent, so if you are time poor or just would prefer something that is turnkey ready, a new property can be better suited to your needs.
Old vs new is a debate that is decided on by you and your needs. And in some cases, a mix of both is what I find a lot of clients go for, to give that portfolio balance.
Have the new home, that does not require much effort with potentially slower capital growth. Then they also have the older property, closer into town that can give you that capital growth a little bit faster.
Craig is the founder of PiC Group since 1993 and SiNC Surveys, and a successful private investor in his own right, coming from a background in the insurance, financial planning and real estate development industries.
General Advice Warning: This blog is not designed to replace professional advice. It has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the advice, in light of your own objectives, financial situation or needs before making any decision as to what is appropriate for you.