Henderson.

Should You Buy a “New”​ Property?

Buying new has really fallen back into focus in recent months thanks to a host of Government incentives which are making newly constructed properties both affordable and very appealing.

But is buying a new property the right thing to do?

Once again, this question comes down to one important thing – what are your personal goals with property?

Not everyone who is looking to purchase a property is doing so to try and make money. In fact, the vast majority of would-be homeowners are simply looking for somewhere for their family to live. For this group of people, rising property prices isn’t all that important and for that reason, it might make sense to take advantage of the host of Goverment incentives and buy new or near-new or even build yourself.

If you are going to be able to live in a suburb that you want to live in then building or buying new can work. You also have zero worry about maintenance for the foreseeable future, because it’s generally covered by the builder if something was to go wrong. So for some people it really does work.

We’ve currently seen the NSW Government also make some changes to stamp duty for first home buyers, who are now able to purchase a newly built home value up to $800,000 and receive the stamp duty exemption. First home buyers are even able to buy homes up to $1 million with the rate of stamp duty tiered from above $800,000.

At the same time, those people looking to build will also be able to access the Federal Government’s HomeBuilder Grant. While there is still the first home buyers grant as well.

All in all, you could stand to save $40-50,000 by going down the path of buying new or building yourself.

However, while there are a host of savings by doing this, if you’re looking to be an investor and build a large portfolio over time, then this might not be the right way to go about it.

The first issue with buying a new build is that it is likely going to not be in an area that is going to have the best long term growth potential.

It’s often the inner-city and beachside suburbs that experience the strongest growth over long periods of time and it’s because of a combination of both demand (because of the appeal and amenity of the suburb), combined with lack of supply.

When you’re buying in the outer suburbs in a bid to access Government incentives, you’re missing one key element of the property equation which is growth potential. And for investors that is a key requirement.

It’s the same sort of thing if you buy into a large apartment development. While you might be able to access some savings, it too is going to be weighed down by oversupply and it wouldn’t see high levels of growth compared to other types of properties.

In effect, you’re saving money now, at the expense of all that capital growth you could be collecting in the future.

While this is a unique time in our history, whereby first home buyers are spoilt with a combination of low interest rates and Government incentives, we always have to remember what ultimately drives property prices over time – supply and demand.

New properties can work for some people, but if you are trying to build something for yourself that you can benefit from in 10 or 20 years time, don’t fall into the trap of simply chasing free Government handouts.