5 'Must Haves' For Buying New Property
Buying into a new development can certainly deliver the goods when it comes to feeling like you've nailed a great investment. But the risks of doing so are often largely ignored.
Buying into a new development can certainly deliver the goods when it comes to feeling like you’ve nailed a great investment. But the risks of buying into new property are often largely ignored.
The benefits of depreciation and the prospect of less wear and tear can certainly have its advantages. However, like any investment people need to understand what they’re getting, and this is especially the case for new builds.
So, where do the risks really lie in buying new? Here are my top picks for why new buys don’t often stack up and what to look out for on your next purchase to alleviate some of these risks.
Mass vs. boutique
Large complexes are all too common with new developments, and many units struggle to differentiate themselves from others in the building when they go to rent or to sell. With a high level of “commonality”, owners end up having to compete on price rather than features.
If you’re buying into a complex, make sure it’s at a boutique level of twenty properties or under or at least has a village-style feel where the buildings have some distinguishing character and some sense of community.
While new properties are lauded as being free of any level of decay, they’re often not cheap to maintain. Many developments come with lifts, pools, gyms and even concierge which only add to high strata fees – payments made every quarter simply to maintain the building.
As a guide, a 2 or 3-bedroom unit with strata fees under $1000 per quarter is considered reasonable. Alternatively, avoid complexes with those facilities mentioned above as they take their toll in both maintenance and repair should things go wrong.
A common trait amongst many developments these days are the low standards of workmanship that many buildings have. It’s all about the dollars, and if corners can be cut, they will be. Unfortunately, many unsuspecting buyers move into the new building only to find that things aren’t up to scratch, many items need repair and the builder/developer is nowhere to be seen.
While established buildings often have issues that need to be addressed at some point, at least you know what you’re getting into beforehand with a thorough building inspection.
If you are looking to purchase new, let the building settle for a couple of years before buying into it. That way all the problems can get ironed out, and you’re not left with a liability, or worse still, a lawsuit against the developer for poor performance.
There’s nothing like driving a brand-new car off the lot with that new car smell. You usually only do it once though as you quickly realise how much the value drops now that it’s “used”.
The same applies to property. If it’s shiny and new, then you will normally pay a premium for it.
This is not the only issue around value though, with many new developments paying high sales commissions, and carrying heavy marketing expenses to sell the property in the first place. They don’t do this for free and much of the time it’s being added on to the market price of the property making the buy price more than it’s actually worth. Many developers try to sell this higher price by promoting what the future value will be once the project is complete, rather than what the value is today.
To ensure you’re getting what you paid for and not some inflated projection, always pay to have an independent Valuation done on the property to give you the real value in today’s dollars.
While there are still developers out there who are lucky enough to secure great sites (Bondi Beach promenade), much of the prime land in cities was developed long ago. This leaves most new developments planted in secondary areas or on main roads because the land is cheap (for a reason).
Average developments built in average locations will make for an average investment. While you can improve many things in a property you can never change the location, so make sure your investment is sitting in the best seat possible when you look to purchase.
Finally, while there are many areas to be aware of when buying new property, the right developments can be a jewel in the crown for years to come. Make sure you do your homework though - that you’re getting what you paid for and that you’ve purchased the best your money can buy. These factors alone will ensure an upward trajectory for your future wealth.