While established properties account for roughly 98% of the market, purchasing new properties does have a number of advantages that are worth considering before you make a decision.
When you start to look for a property, one of the first things you need to decide is whether to buy a new or established property. You’ve probably heard of new properties being described as ‘off-the-plan’, which basically means they’re yet to be built or have recently been completed. Established properties, on the other hand, have been completed and someone has lived in them for at least six months.
Everyone from your next-door neighbour to your mother-in-law will have an opinion on which option to go for. And while established properties account for roughly 98% of the market, and is the obvious first choice for purchasers, purchasing off-the-plan does have a number of advantages that are worth considering before you make a decision.
How much of a handy person are you?
Established properties, especially older ones, can require a lot of maintenance compared to new properties. You should consider whether you’ll be up for handling any maintenance on an investment property yourself, or if it’s something you’ll need to outsource.
It’s also important to note that any defects and rectification works are generally covered by the builders and/or developer through warranties when you purchase a new property. This often isn’t the case for established, where it’s generally now the responsibility of the new owner.
The other thing to think about is the need for renovations. An off-the-plan purchase will be ready to go. There’s a high chance, however, that an established property might need a reno update before it’s ready to lease out. This could be anything from new carpets and a new coat of paint, to kitchen and bathroom renovations.
Incentives, incentives, incentives
The government wishes to add to the housing supply, which is why they encourage purchasing of new properties. If you’re strategic and do your research, you can save a decent amount of cash by using such incentives.
There are often government-approved incentives for buying off-the-plan, including greater stamp duty savings…
Stamp Duty Savings
Depending on which state you live, you may be eligible for stamp duty savings for buying a brand new property that isn’t available for established properties.
This is especially true for buying land and building a new home – depending on your state, you may only pay stamp duty on the land amount at settlement, even though once construction is complete you home may be worth more than twice the land value!
There’s also greater depreciation benefits to buying a new property. Depreciation is when an asset – in this case, a property – loses value over time, generally due to use or wear and tear. The Australian Taxation Office (ATO) lets property investors claim this depreciation as a tax deduction. This means you’ll see greater tax breaks if you buy a new property, as it will see higher levels of depreciation over time, compared with an established property. More on this later in our tax section!
Developer and Builder Incentives
Even vendors of off-the-plan properties can provide incentives for you to purchase – these can include rebates at settlement, free furniture, rental guarantees etc. Whether you are eligible for these developer incentives is how good you are at negotiating – if bargaining with an agent makes you feel nervous that’s where Oli is here to help!
The above information will help you weigh up the pros and cons of buying new versus established. Off-the-plan properties are certainly worth looking into and can be a strategic move for investors and new homeowners.
The next thing to think about – exactly what type of property do you want to invest in? You can find out more about that here.
When you start to look for an investment property, one of the first things you need to decide is whether to buy a new or established property. And while established properties account for roughly 98% of the market, purchasing off-the-plan does have a number of advantages that are worth considering before you make a decision.
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