Which is better buying: Old or new properties?

When buying a car, television or washing machine, new is usually better. But when it comes to buying a house or apartment – can you draw the same conclusion?

There are certain advantages and risks to be aware of when buying both old and new property. Check out the pros and cons.

Choosing old property

Mark Erichiello, Buyer’s Agent and Director at Master Advocates Real Estate Services, has being buying and selling real estate in Melbourne since 2000. He says his best results have come from investing in established property.

“My preference to established is more so because I can compare and physically inspect the property, not just in terms of fixtures and fittings, but I can compare with other properties on the market,” he says.

Comparable in the marketplace

• Ability to physically inspect the property
• Comparables in the market – other similar sold properties – can generally give you an estimate of the property’s value.

Structure and aesthetic

• Many established homes have stood the test of time structurally and aesthetically
• Period homes have a large following from buyers, renters and investors.

Best buying: 10 features to look for when buying a period home

Value add opportunities

• Builders and developers can try to maximise land value by sub-dividing
• Investors can breath new life into property by renovating, potentially increasing profitability.

Choosing new property

Darryl Simms, Property Investment Specialist at Latte Property, is in favour of buying new for the potential savings, tax depreciation and added luxury it can afford.

“For investors there are much larger tax depreciation benefits (for new homes) which reduce the holding costs of your investment property,” Simms says.

“In Victoria, you could potentially save over $18,700 (in stamp duty) on a $500,000 purchase by choosing to buy a new property off-the-plan instead of an established home,” Simms says.

Incentives and deals

• For investors, tax depreciation benefits could reduce the holding costs of your property
• Significant stamp duty benefits that could mean $1000s in savings.

Built for modern living

• New properties are generally lower maintenence
• Low energy ratings make them cheaper to run, reducing ongoing costs
• Luxuries such as swimming pools, ensuite bathrooms and theatre rooms are often included, which can be costly to add into an existing property.

Unique and boutique

• While bigger estates and high-rise developments can take longer to pay-off, small sub-divided areas in established suburbs could have good immediate capital growth potential
• Look for unique, boutique developments in low supply areas.

Best sellers: The most popular apartment developments in 2015

Risks & tips: Old property

Erichiello says while established properties can be easier to predict in terms of growth potential, there can be risks and hidden costs if you don’t do your homework.

He recommends enlisting the help of building inspectors, surveyors and solicitors specialising in property – “before you even begin to talk money” – to avoid nasty surprises later on.

Maintenance issues

• Older properties can have structural issues, so talk to a building inspector before you sign anything
• If you need more work to get the house in working order, a building inspection may give you room to negotiate.

Easements/caveats

• Easements or caveats on the title may affect your plans for the property
• Check ownership on title and vendor warranties to make sure everything goes smoothly on settlement day
• Enlist a solicitor that specialises in property to provide you with an independent pre-purchase contract review
• Renovating or sub-dividing? Consult with council and building surveyors to make sure your plans are valid.

Emotional buyers

• Emotional buyers can drive up property prices at auction

Risks & tips: New property

When buying new it comes down to doing your homework. If investing, you need to know where there’s likely to be a limited supply. If you’re planning to occupy, make sure you get a solicitor to thoroughly check the contracts of sale to ensure you’re not at risk of delays.

“If you’re looking to buy brand new and occupy, and you trust the builder – then it could work for you,” Erichiello says.

“You can get excited by deals and the initial savings of getting a brand new place, but always do your homework to minimise risks.”

Unpredictable growth

• Similar properties in the same area, far from the city may be slow to grow in value
• Apartment blocks in a recently zoned area could be in over-supply and potentially difficult to rent out
• Be careful of growth corridors if investing – you could be waiting a while for capital gains.

On the rise: Best growth suburbs within 20km of the city

Possible delays or extra costs

• Risk of delays in handing over the finished product and possible variances in price
• Get a solicitor to check the sale contracts of new properties
• Choose developers carefully and run background checks on associated parties.

Buying old or new in today’s market

Erichiello says 2015 saw a market on the rise, and it was very difficult not to overpay. With the market beginning to correct, there may be more opportunities for buyers who missed out last year – for both old and new properties.

“Last year old or established properties were really strong with auctions… it was a bit hard not to take risks. But if you’re in a market that’s going to correct a bit, then you can start insisting on building inspections before you agree to sign anything,” he says.

“If building inspectors come out with $50,000 of faults for the property that you want to buy, then you may be able to justify the price that you’re trying to negotiate – you’re basing it on fact not what you’d like to pay.”

He says buying established properties in today’s market may leave more room to negotiate on price.

Save: 5 reasons a pre-purchase building inspection is essential

Simms says it takes careful research, knowledge and expertise to ensure you buy the right type of property in the right location to maximise your capital growth potential and/or rental return.

“In Melbourne, there is a good level of quality (new) stock in suburbs just outside the CBD presenting some excellent buying opportunities.”

Whether buying old or new, buyers should try not to be seduced by up-front savings or emotional attachments.

“It’s more about selecting the right property and location that is low maintenance in cost and labour without hidden surprises, and has more opportunity for capital growth and rental yield potential,” says Erichiello.