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.
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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 $18,7000 (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.
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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.
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.”
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Possible delays or extra costs
Erichiello says 2015 saw a market on the rise, and it was very difficult not to overpay. With the market beginning to correct, there may be more opportunities for buyers who missed out last year – for both old and new properties.
“Last year old or established properties were really strong with auctions… it was a bit hard not to take risks. But if you’re in a market that’s going to correct a bit, then you can start insisting on building inspections before you agree to sign anything,” he says.
“If building inspectors come out with $50,000 of faults for the property that you want to buy, then you may be able to justify the price that you’re trying to negotiate – you’re basing it on fact not what you’d like to pay.”
He says buying established properties in today’s market may leave more room to negotiate on price.
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Simms says it takes careful research, knowledge and expertise to ensure you buy the right type of property in the right location to maximise your capital growth potential and/or rental return.
“In Melbourne, there is a good level of quality (new) stock in suburbs just outside the CBD presenting some excellent buying opportunities.”
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.
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