What kind of property would suit you best?
It’s officially a buyer’s market. Existing homes look like bargains compared to peak prices last year, and building a brand new home could also be in the budget. If you’re looking to purchase a house, you will have a much more enjoyable experience than you would have had a year ago.
With more options at your fingertips, are you better to buy a new build or an existing property? Choosing between the two depends on your goals, budget and lifestyle, but the decision could significantly affect your long-term profits. Aseem Agarwal, Head of Mortgage at Global Finance Services, and Lance Beddoes, Real Estate agent at Harveys Te Atatu, speak to the main differences, so you can decide what works best for your situation.
Pros of buying an existing home
Once you’ve been pre-approved for a mortgage, you can shop for a home that ticks all your boxes and move in as soon as you settle. Here are some of the biggest advantages of buying an established home:
1. You know exactly what you’re paying for
When you know the purchase price of your new home, you can see what it looks like, so factoring in improvements is straightforward. For example, if the bathroom doesn’t suit your taste, you can budget for that renovation when applying for your loan. Aseem says, “When you buy an existing home, what you see is what you get.”
Lance notes that making improvements to an existing home lets you add value more easily than if it were a new build. “Things like fresh paint, kitchen updates or new flooring will fix issues and add value straight away,” says Lance.
2. You’ll probably get a bigger section
Aseem tells first-home buyers that depending on goals for the future, a bigger section allows you to expand your home, put in a swimming pool or even subdivide. “In the meantime, the extra land gives you more privacy and an enviable outdoor lifestyle.” Lance notes that “the additional parking space you’ll have with an existing property can end up being a huge advantage over new builds.”
3. It comes well-established
Aside from often having more character and charm, existing homes are generally in established neighbourhoods with parks, schools, shops and restaurants already nearby. This means you can get a feel for the community before you make your decision. And when residents have been there for a long time, there’s also a vested interest in the area to keep it safe and well-maintained. With a new build, you’re starting from scratch.
Downsides of buying an existing home
When buying an established home, it’s important to do a thorough inspection. Here are some potential risks to consider before buying:
1. More maintenance
Existing homes come in all shapes and sizes. The time and money you’ll spend on maintenance and repairs will depend on how old it is, what kind of building materials were used and how well it was looked after. If there are outdated features, such as old electrical systems or appliances, be sure to factor those updates into the budget before buying. If you choose to buy an existing home, learn how to best protect your investment here.
2. Limited room for customisation
When you buy an existing home, you’re buying someone else’s vision — what fixtures they chose, the layout, the flooring and the kitchen appliances are all predetermined. You can update many superficial things easily, but any extensive customisations will increase the cost of your home without necessarily bringing up the value.
Pros of buying a new build
New builds are just that – brand new – and, along with some government incentives, that can mean buying has some major upsides.
1. Customisable
A new build generally allows you to design the home to your taste. Even if you’re buying off the plans, you’ll at least be able to choose paint colours, finishes and fixtures. Some companies will help you design an entirely custom home. If you have a clear vision, this could be a great way to make it a reality.
2. Low maintenance
A new build will require significantly less maintenance than an existing home, as everything is up to date. That’s why a new build can and should come with a warranty from the builder. Buyers get peace of mind, knowing there are no unforeseen maintenance costs. “As they have to meet the latest building standards, new builds look great, and there’s no need for immediate repairs,” explains Aseem.
3. Modern comforts for less
By incorporating the latest energy-efficient appliances and construction materials, new builds can save you money on energy once you move in. They often include the latest design trends and technology, making the home more functional and liveable.
4. Lending has softened for new builds
Because the government wants to encourage more building, Lance notes that getting a loan for a new build can be easier for first-home buyers than buying an existing home.
“The government offers up to $10,000 for a new build and only $5000 for an existing home,” he explains.
The banks also have more relaxed lending criteria, so it may be easier for you to get a loan on a new build. Have a look at the Kāinga Ora website to find out more.
Downsides of buying a new build
Even though it may be easier to get a loan, new builds do come with some downsides. Here are a few things to consider before making your decision:
1. Delays
It’s common for any building project to have setbacks, but with so many new build incentives in New Zealand right now, builders are particularly busy. However, once you’ve paid the deposit, the price will stay the same whether you take ownership in two months or six.
2. Limited space
With new builds, the developer has carefully planned the land to make the most of the square meterage. When it comes to size and location, you may not have the space or privacy you desire.
“As the majority of developers are building townhouses, most new constructions in New Zealand are barely on a 200sqm section. “If you want to expand your home in the future, you won’t have that opportunity with a new build,” says Aseem.
Consider the big picture
Both options have advantages and disadvantages, and it’s important to weigh them against your personal goals. Where do you want to live? How much space do you need? How much maintenance are you willing to do? Do you want character and charm or brand new and high spec? What type of community are you drawn to? And, of course, what’s your budget and income?
By answering these questions, you’ll know which option suits you best. We recommend consulting a real estate agent and a mortgage broker before making the final decision.
Still not sure what would work best for your situation? Speak to a Global Finance expert today.
The information and articles published on this website are true and accurate to the best of the Global Finance Services Ltd knowledge. The information given in articles on this website should not be substituted for financial advice. Financial advice should always be sought. No person or persons who rely directly or indirectly upon information contained in this article may hold Global Financial Services Ltd or their employees liable.