Buying new vs established? Weighing up the pros and cons...

Brand new or pre-loved? Deciding on whether you want to buy a new home or an established property is an important first step when you start out on your home buyer journey.

But how do you know which will be the best option for you? Let’s unpack some pros and cons to help you decide.

Buying a brand new home

The upsides and down of buying a brand new home. 

Upsides: 

• Stamp duty savings - With new house and land packages, stamp duty will potentially only be payable on the land value component, not the dwelling itself, depending on which state you live in.
• Depreciation perks - If you’re looking to rent your property out, you might be able to take advantage of tax perks, especially for the first 5-10 years, that may let you claim depreciation costs on things like furnishings. 
• Less maintenance - You’ll generally be up for fewer maintenance and repair costs, at least in the short and medium term, than you will be for an older home.
• Higher rental returns - Newer homes may typically command higher rental returns and are more appealing to tenants on the whole than older homes are. That’s definitely a plus if you’re looking to rent out your property. 

Downsides:

• Price – Depending on which state you live, new homes and units may be more expensive than established homes of a comparable size, so affordability will be an important consideration too.
• Lower capital growth potential - With new properties, because the land to asset ratio (LAR) is often lower, there may be lower capital growth potential too, since the home component of your property could depreciate over time, even as the land may appreciate. 
• Less infrastructure - There may not be as much established infrastructure when you buy new, both in terms of the property itself as well as community amenities, especially if it’s a new housing estate or suburb.
• Higher investment risk - There is generally a higher investment risk involved with new properties because you won’t have a resale history to go off.
• Less potential to value add - If DIY and renovating is your thing, a brand new home will give you fewer opportunities to add value through improvements and renos.

Buying an established home

So what about buying an established home? Let’s see how it stacks up.

Upsides: 

• Adding value - Looking to add value to your home over time? Established homes will generally offer a better canvas when it comes to adding value through home improvements and renos.
• Capital growth potential - Because dwellings may potentially depreciate over time, but land generally goes up in value, established homes tend to have a higher land to asset ratio. Which means the potential for capital growth can be higher too.
• Track record - With established properties, you generally have access to transaction history from previous sales, to help ascertain the movements of property value over time. 
• Existing infrastructure - Don’t underestimate the value that established infrastructure like gardens, sheds, tanks or fencing can add. Access to amenities in established suburbs including pools, schools, parks and shops can all add value to a property too.

Downsides:

• Costs to maintain - On the downside, the cost to maintain an established home is likely to be higher than when you buy brand new so it’s important to factor repair and maintenance costs into your budget and decision making. 
• Personal preference - Taking your personal preference into account is important. Living in an older style property might not be your cup of tea if you enjoy the finer things in life or prefer a modern home aesthetic. 
• Lower rental returns - Older homes tend to have less appeal for tenants and may not give you the same returns as a brand new property will if you’re looking to rent it out in the future.  

Ready to explore your options?

Now that you’re across some of the pros and cons of buying new vs established, it’s a great time to start exploring your home loan options¹.

Need a little extra guidance? Why not book a call back to speak with a Lending Specialist to help you weigh things up?

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