When it comes to property investment, one of the biggest decisions you’ll have to make is whether to buy a new build or an established property.
Both options offer unique advantages and drawbacks, and understanding these can help you make an informed choice. Let’s take a closer look at the pros and cons of each.
New Build Properties
Newly built properties have become increasingly popular among Australian investors in recent years, and for good reason. Here’s what you should consider:
Pros:
- Government Incentives: Depending on where you’re buying, you may be eligible for grants and concessions when purchasing a new build. Some states and territories offer more significant incentives for new homes, especially for first-home buyers.
- Low Maintenance Costs: New homes come with modern fixtures, appliances, and building materials that meet current standards. This means you’re unlikely to face significant maintenance costs for many years, and most new builds come with builder warranties, giving you peace of mind.
- Tax Benefits: Investors can claim depreciation on new properties, both on the building itself and its fixtures and fittings. This can significantly reduce your taxable income, improving cash flow.
- Energy Efficiency: New homes are built to meet modern energy efficiency standards. This can reduce ongoing utility costs, making the property more attractive to renters who appreciate lower bills.
Cons:
- Potential Oversupply: In some areas, particularly in outer suburbs or fast-growing regions, there is the risk of oversupply. Large developments can lead to a glut of properties on the market, impacting rental yields and capital growth prospects.
- Limited Location Choices: New builds are often found in outer suburbs or new estates, which may not have the same established infrastructure, amenities, or transport links as more central areas. While these areas may grow, the location may not attract high rents or experience rapid capital growth in the short term.
- Higher Purchase Prices: New builds often come with a premium price tag due to the “newness” appeal. In some cases, you may pay more for a new property compared to an established home in the same area.
Established Properties
Established properties are homes that have been lived in before, and of course make up most of the market. Here’s why they can often be a better option:
Pros:
- Proven Growth and Demand: Established homes often come with a history of capital growth, allowing you to better gauge how the property and area have performed over time. If you buy in an area with a strong track record, your investment may appreciate more steadily.
- Prime Locations: Established properties are usually in more developed areas with existing infrastructure, schools, shops, and public transport. These locations are often more desirable, attracting tenants and supporting higher rental yields.
- Room for Value-Add: Many established properties present opportunities for renovation or cosmetic upgrades. By adding value to the property, you can increase rental income and significantly boost resale value.
Cons:
- Higher Maintenance Costs: Older homes may come with a range of issues, from outdated wiring to plumbing or roofing problems. Maintenance can become costly and unexpected, cutting into your investment returns compared to that of a new build.
- Less Tax Depreciation: While you can still claim depreciation on some fixtures and fittings, established homes don’t offer the same level of tax benefits that new builds do, especially if the building is quite old.
- Potential for Less Energy Efficiency: Older homes may not meet modern energy standards, which can lead to higher utility bills. This may make the property less appealing to those who are conscious of ongoing costs.
Ultimately, whether you choose a new build, or an established property depends on your investment strategy and priorities. New builds offer modern features, lower maintenance, and tax depreciation benefits, making them potentially more attractive for investors focused on cash flow.
However, established properties provide proven growth potential, desirable locations, and often major value-adding opportunities. As with any investment, it’s vital that you research the local market and understand which option aligns best with your long-term goals.
Want to discuss this further?
For expert guidance in property strategy, and what it could mean for you as a property investor, book in for a free consultation to make informed decisions, tailored to your investment goals. Don’t let affordability challenges hinder your success. Act now with Search Party Property!
