Established home vs new build? The pros and cons

Existing home or a new build? What is there to consider in making a decision? Is it just a matter of personal preference or are there other things to consider? 

The truth is, it’s a little bit of both, so let’s take a look at the pros and cons for each option to help you decide the best way forward.

Buying established

Some pros and cons of buying an established home.

Pros: 

• Higher land value - Established homes tend to have a higher land to asset ratio. Since the value of land generally appreciates over time, and houses may depreciate, the potential for capital growth can be higher.
• Value-add potential - If DIY’s your thing, established homes will typically give you better bang for buck when it comes to value-adding through renos and other improvements. 
• Established resale history - With established properties, you have access to transaction history from previous sales, to help ascertain the movement of property values over time. 
• Established infrastructure - Think established gardens, sheds, tanks and  fencing which all add value to a property, as does access to amenities and infrastructure like pools, schools, parks and shops in established suburbs.

Cons:

• Livability and preference - Like the finer things in life? Living in an older style property might not be your cup of tea. It’s important to take your personal preferences into account too.
• Maintenance and repair costs - One of the downsides of buying an established home is that you’ll likely be up for more maintenance and repair costs than you will when you buy new, at least in the short to medium term.
• Lower rental yields - If you’re looking to rent out your property, older style dwellings can often have less tenant appeal and may not command the same rental returns as brand new premises will.

Buying a new home

So how do brand new homes stack up? Let’s break it down.

Pros: 

• Government incentives - Potential savings with stamp duty payable only on the land value for new house and land packages, depending on which state you live in.
• Tax perks for investors - For investors, new or off-the-plan properties may offer some attractive tax perks with depreciation potentially claimable on things like furnishing costs.
• Lower maintenance costs - With new homes, you’ll generally be up for fewer ongoing maintenance and repair costs.
• Rental returns - With newer homes and contemporary interiors more appealing to prospective tenants, you may enjoy higher rental returns on brand new homes.

Cons:

• Affordability – Depending on which state you live in, new homes and units may be more expensive than established homes of a comparable size, so your budget is an important consideration too.
• Lower land to asset ratio - There tends to be lower capital growth potential with new properties because the land to asset ratio is often lower. 
• Lack of infrastructure - With new home and land packages there may not be as much established infrastructure, both on the property itself as well as within the community if it’s a new housing estate.
• Greater risk - Without a track record of resale and capital growth, there may be a greater investment risk involved with buying new properties.
• Less value add potential – There may be less potential to add value through renovations and improvements so if you’re looking to DIY and revamp, a brand new property won’t be the best choice for you. 

Ready to do your home loan homework?

Now that you’ve got a better idea of how buying new vs established homes stack up, it’s a good time to do some home loan homework.

Explore some great home loan options here¹ or, if you need a little extra guidance, why not speak with a Lending Specialist to help you weigh up your options?

Book a call back