New or Old
Things to consider
Greville Pabst talks to it’s my home about the pros and cons of buying an established versus a newly built property
For smaller purchases like electronics and furniture, buying new is usually a no-brainer. But when it comes to deciding between a house and land package or an older property, there are many more factors at play. With higher risks and benefits at stake, you need to weigh up all your options to make a better property decision.
Older property pros
One of the main advantages of buying an established home is that you know what you’re getting. Any defects should show up in a building inspection report, giving you an accurate picture to help you make better investment decisions. Knowing whether you need to factor any repairs or maintenance into your budget, gives you greater clarity.
When you buy an older established home, you’re not just buying the house, you’re also buying in the neighbourhood. This can be a huge drawcard for first homebuyers who are looking for certain amenities like good schools, hospitals, public transport, entertainment and cafes. For first homebuyers looking for character or properties that are a little more unique, older homes tend to be less cookiecutter and can give first homebuyers more of an opportunity to put their stamp on a place.
If being close to the city is important to you, then an established home might give you more options when it comes to whereabouts. With a budget for a home near the city, you’ll have more flexibility to find a well-connected place close to infrastructure and more commute-friendly. Most house and land packages tend to be further away from the city where transport links aren’t as entrenched. At the end of the day, it’s about finding the right balance between value and lifestyle.
‘Location, location, location’ – it’s an adage for a reason
Older property cons
While there are many advantages to buying an older home, there are some factors to think through. The biggest one is maintenance. Because the house is pre-existing, it generally won’t come with any sort of warranty on building defects, and tracking down the original builder might not be possible. Depending on the age and condition of the home, there’s probably some wear and tear. Beyond cosmetic things like paint and scratches, there may be structural issues lurking beyond the brickwork. Before you sign anything, get a professional opinion because the last thing you want is a leaking roof or an asbestos scare.
Because you’re not the first owner, have a solicitor check the contract and run a background search on the title deeds to make sure there are no easements or caveats on the property. You’ll want to double check that there’s nothing that could hold you back from making future plans or affect the resale value of the house.
When it comes to auction day, older houses tend to be more emotional purchases. Because the home is established, it’s easy to imagine yourself living there. While it’s great to get excited about potentially owning your first home, this can drive the price up at auction. If you find yourself planning your housewarming at the first inspection, it might be time to consider using a buyer’s agent or an independent property adviser.
New property pros
If you’ve got limited funds, buying a new property or opting for a home and land package might be a more affordable way to get your foot in the door. With more grants and incentives available, there’s a financial upside to investing in a new home. Depending on which state you’re buying in, you may be eligible for stamp duty exemptions and additional First Home Owners Grants (FHOGs).
For example, the Victorian FHOG is currently giving first homebuyers $10,000 if they purchase a ‘new’ home valued up to $750,000 in a metropolitan area. If you buy a new home in a regional area, the total FHOG is $20,000.
Dollars and cents aside, there are other advantages to building a new home. Starting from scratch gives you an opportunity to create and customise the house to suit your tastes, needs and lifestyle. Because the house is new, it’s more likely to be energy efficient and sustainably designed, meaning it’ll be cooler in summer, warmer in winter and generally cost you less to run. The other main advantage of building a new home is fewer maintenance costs because the materials are newer and more efficient.
Depending on where you buy, the main difference between an established home and a new home is the land size. House and land packages further outside the city tend to be larger, so if space is your priority, then this might be an option worth exploring.
New property cons
The most obvious consideration about building a new home is the time it takes. The usual settlement period on an older home is about six weeks. According to the Australian Housing and Urban Research Institute, the average house takes 7.5 months to build. That doesn’t take into account any delays caused by approvals, weather or hold ups with building materials. Some lenders put restrictions on finance for new builds and require that the house is completed within a specific timeframe. Before you engage a builder, make sure you leave yourself a buffer just in case the process takes longer than expected.
When you buy an older home, the costs are fixed, but when it comes to building, it’s a different story. To avoid cost creep, keep a close eye on the budget and make sure the builder’s contract includes all the extras, like fencing, driveway, tapware and paving, to name a few.
When building, costs can spiral out of control if you don’t carefully monitor what’s being spent and where. Some builder’s fees don’t include everything you may have assumed, like driveways or light fittings, for example. Check your builder’s contract carefully for all the inclusions you need.
Before you agree on any fixtures or fittings, invest in independent advice. You’re making one of the biggest decisions of your life, so get it right, do your research and get great advice.
As an expert in the Australian property market, international keynote speaker, CEO and Executive Chairman of WBP Property Group. He is a passionate advocate for the role property plays in developing personal wealth. With three decades of experience in the Australian property market, Greville has a wide range of experience across residential and commercial property. For more information about WBP Property Group and Greville Pabst go to wbppropertygroup.com