4+2 Reasons Why You Need To Buy New Build Property NOW
One of the key decision people make when buying property is to buy an existing property or to buy new build property. Sometimes as a First Home Buyer (FHB) or an investor you are forced by the bank to buy newly built property as your finance strategy. A couple of advantages of new builds properties are:
- New builds properties are bank-friendly, you can buy new build property with a 5~15% deposit (instead of 20%) if you are a FHB or with a 20% deposit (instead of 40%) if you are an investor.
- New builds properties have better quality, are warm, and healthy and attract better tenants with higher rent.
- New builds properties are exempt from tax deductibility for 20 years and the bright line is 5 years (instead of 10 years).
- Considering the same price usually new builds have bigger floor areas (more bedrooms) while existing properties have bigger land.
For any reason, if you decided to buy a newly built property, today is the best time for it. Let’s discuss a couple of facts:
- There is 7% inflation in the economy, which result in construction cost increase as well. Due to Covid-9 and transport disruption, construction costs increased by 20%. This means for a 100m floor area property at least a $60K increase per year.
- Government introduces new building code (more energy efficient) which needs to be implemented from Nov. 2022. Roughly this new standard increases construction cost by 50K.
- Due to increasing interest rates and tight financial situations some builders must sell with less (or no profit) to avoid bankruptcy. You could really find good deals.
- Due to CCCFA some people who bought new builds off the market previously, now when the property is ready cannot get finance and must sell the price they bought 1~2 years ago.
- There is an oversupply of new builds properties in some parts of New Zealand, for example, West Auckland which results in competition and price drop.
- More immigrants are coming to New Zealand and expected more residency in the next 2 years which results in more houses required especially new builds properties.
If your plan is to buy newly built property, it is almost $200K~$250K cheaper to buy now rather than 2 years later. While the property market is practising price drops there is good potential for a price increase for new builds properties.
Even finding and buying newly built property needs extra consideration and careful due to diligence. If you don’t know how and need help you can contact me.