Are you prepared to begin looking for your dream house now that you have your deposit together? One of the first decisions you will have to make is whether to purchase a new house or an old one.
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However, how can you determine which one is best for you? Let’s examine some of the advantages and disadvantages.
Purchasing an existing property
What are the advantages?
You can increase value: If you enjoy do-it-yourself projects and repairs, purchasing an existing house can be a wise decision. Older or established properties sometimes have a greater potential to increase value over time via modifications and renovations.
Improved land value: Existing homes often have a greater land to asset ratio (LAR), which indicates that the land portion of the property is larger than the dwelling. A larger Loan to Asset Ratio (LAR) indicates greater potential for capital growth because land prices typically rise over time, while home values may decrease.
Known history: Since existing properties often have a known history, you can see how much the property has increased in value based on past selling prices, which can help you predict how much it might rise in the future.
Property plus community infrastructure: In well-established suburbs, existing homes usually have the added value of community facilities like schools, parks, swimming pools, and retail centers, as well as infrastructure like fences and existing gardens or sheds.
What are the drawbacks?
Liveability + personal preference: Both your personal preferences and the liveability of a home are significant factors. Are you eager to live in a place that is spic and span despite all the mod cons? You might not be a good fit for an older type property.
Property maintenance: You’ll need to set aside a bit extra money for repairs and upkeep because older and more established houses usually require more upkeep than new ones.
Lower rental returns: If you’re considering renting out your house in the future, rent potential may be a crucial consideration to consider because newer properties may provide higher rental returns and be more desirable to tenants.
Purchasing a new item
How about purchasing a brand-new house? Let’s examine the comparison.
What are the advantages?
Reduced maintenance expenses: Compared to purchasing an established property, you will often be up for less repairs and reduced maintenance expenditures over the near term at least.
Stamp duty on land only: Depending on the state in which you reside, you may only be required to pay stamp duty on the land value of a newly constructed home rather than the actual house or residence.
Benefits for investments: New houses may provide tax advantages to homeowners who want to rent out their property, such as the possibility of deducting expenses for furnishings and other items.
larger rent: If you’re planning to rent your property soon, you can anticipate a larger rental return for a new home or apartment than you would for an older one.
What are the drawbacks?
Cost of acquisition: Compared to an existing home of the same size, brand-new homes may be more expensive up front. The area and state in which you reside will determine this.
Less opportunity for capital growth: Because new properties often have a lower land to asset ratio, there is frequently less possibility for capital development. You might not get the same benefits as you would with an existing home because the land component’s value may increase with time.
Less established infrastructure: Compared to an established house and suburb, you may not have as much established infrastructure value on the property itself or in the surrounding neighborhood (think established gardens, community amenities).
No sale history: Since there is no resale history to help forecast capital growth potential, investing in new properties often carries a higher risk.
Less room for improvement: If you’re searching for space to DIY or renovate, a new house might not be the ideal option because it usually doesn’t allow you to increase value via renovations or other changes.
