There is a lot of debates between the first home buyers in the market as to whether they should target brand new properties or existing properties. Through our experience in closing hundreds of first home buyer deals, we have gathered some insights on why they tend to choose one over another.
There are some significant differences between buying New Property and Existing Property in term of the benefits.
Brand New Property’s benefits are:
- Materials, appliances and equipment are brand new which come with several warranties.
The warranties provided are the structural warranty (usually 6 and a half years from the builder), the kitchen appliances warranty (usually 12 months from the manufacturer) and the workmanship warranty (usually 90 days from the day of settlement). The warranties will give the buyers peace of mind should any construction or workmanship problems arise in the future.
- For rental property investment, buying a brand-new property will provide additional tax deductions (such as depreciation expense).
According to Investopedia, a tax deduction is defined as:
A deduction that lowers a person’s tax liability by lowering their taxable income.
Note that since the change of legislation about depreciation schedule from 9 May 2017, only brand-new properties can claim the depreciation schedule or depreciation expenses.
Further information about the depreciation schedule is as follows:
- Latest Design and Layout.
Many old (existing) properties are larger than most new apartments or townhouses, although they usually come with an inefficient design or layout. The latest sleek and effective designs and layouts which are usually the features of the brand-new properties help the spaces become a lot more functional for its residents. Many people do not realise that the new open living and dining area is much more attractive to the modern prospective buyers than the older design that has excessive separations between rooms.
- Buyers would not worry about too many repairs and maintenances.
This is one of the main reasons choosing brand new properties over existing properties. Existing properties that are more than 10-year-old usually come with a lot of repairs and maintenance costs during ownership tenure due to the regular usage of drainage and the life span of materials & electronics installed. Repairs and maintenance costs are considered hidden costs for the existing property owners.
- For the rental property market, brand new properties are usually more in-demand than existing properties.
Tenants are somehow willing to pay a little more (around 10% to 20% above the market) if the properties are brand new.
- Brand New Infrastructure.
The electricity, gas, and water systems are all brand new, engineered and installed to the latest design and quality. Also, not to mention that a fast and reliable internet connection has become a necessity in everyday life. Older properties in old suburbs often do not even provide up-to-date internet connection (such as NBN connection). Slow internet connection will not attract the modern occupiers that demand the latest lifestyle services such as Netflix, Stan, Disney+, Zoom meetings, Dropbox and others. On the other side, brand new properties must be equipped with NBN connection as per standard council requirements in New South Wales.
- Brand New Properties come with Stimulus from the federal government as well as state government.
Currently, in NSW, there are 4 different stimulus: First Home Owner Grant ($10,000), Home Build Scheme ($25,000), First Home Buyer Assistance Scheme ($0 stamp duty payable), 5% deposit scheme (No mortgage insurance payable).
Sources are as per below links:
Existing Property Benefits are:
- You get what you see.
Many people find it difficult to visualise their brand-new properties without directly touching and feeling them. With existing properties, they get what they pay for and see. As long as the contract states the inclusions of the property, homebuyers do not need to estimate the size of the room, the placement of furniture, the ceiling height, the quality of workmanship and other details.
- No waiting period.
Brand New Properties usually come with a waiting period of 1 to 2 years. In Sydney, it is a rare case when brand new properties are completed without pre-purchased off the plan due to strong demand. With existing properties, homebuyers could settle within 6 weeks after the contract exchange for the case of the normal settlement period.
- Safe in terms of the home loan application.
As we are all well aware that brand new properties with waiting period directly tie in with the unpredictability aspect of the global economic condition. Brand new properties that needed to settle during the 2018 to mid-2019 market downturn would have to face the tight mortgage condition, the decrease in borrowing capacity, and high deposit scheme. The purchase of Existing Properties can be executed as soon as pre-loan approval is granted.
- Building or Strata Report check.
With existing properties, building or strata report can be implemented immediately without waiting for completion.
- A valuation can be implemented before the contract exchange (commitment to buy).
The valuation process would only take 2 to 3 business days. The bank will return with a loan to value ratio, which indicates the bank’s comfortability in providing the loan for a particular property. Valuation is the main factor that makes a difference when buying existing properties. It will involve less speculation/fluctuation and alignment of the facts with the current market condition and banking regulation rather than postponing it for one or few years till completion of the property.
Above are the main differences between buying brand new properties and existing properties. We have extensive knowledge, skills, and experience that will assist our customers to locate the best property as per their needs and lifestyle. For any kind of property needs whether it is brand new or existing, please contact firstname.lastname@example.org or (02) 8386 2977.