Should I buy brand new or established properties?
Should I buy a brand new property or should I buy an established property?
Whilst this video isn't to give you advice on which way to go what I'm going to do is to talk about the benefits of buying brand new otherwise known as off the plan, the considerations for buying off the plan, the benefits of buying established and the considerations of buying established, there's a lot of other factors that come such as location, whether you’re looking for an investment or place to live in.
That type of video will take a few hours, I'm certainly not going to take up that much time.
Lets get started with buying brand new off the plan, there's a lot of tax advantages that I'll run through starting with maximum depreciation on the property, what does it mean?
It means that you get to depreciate the fixtures and fittings of the property over a five-year period ideally and you'll be able to get some great tax concessions on your tax bill, that will depend on your income in your circumstances but it can be on for the first year about $15 000 saving, then the second year it drops to about $12,000 saving and drops down every year.
Another benefit for buying off the plan is stamp duty concessions, first home buyers geta concession on established properties as well up to a certain price.
If you're not a first home buyer and you are looking to purchase to live in a property depending on what stage during the construction you sign the contract you can be eligible for stamp duty concessions.
To give you an idea if you were to pay full stamp duty on a purchase price of $500,000 you would pay about $18,000 - $20,000 in stamp duty, please find link below to the state revenue office's website and they have examples on when and how you’d be entitled to a stamp duty saving.
https://www.sro.vic.gov.au/offtheplan
Another advantage is the ability to lock in a price, there's always a lot of commentary about how the pricing of houses are running away and people can't save enough to get into the market.
Let's say you're looking at a property off the plan and it's going to be ready in 18months time you can actually lock in that price, continue to save for 18 months and then settle on the price you signed the contract at 18 months ago, even ifthe market has increased since then the price is locked in.
It’s a really great way of ensuring that the market doesn't run away.
Another great advantages for brand new house and land packages is you will only be paying stamp duty on the price of the land.
House and land are two contracts, you've got a contract of sale for the land and a contract for the build, let's say for arguments say
the contract for the land is $300,000, the contract for the build is $300,000 then you're only paying stamp duty on the land being $300,000 not the full price of$600,000.
If you were to buy established in that same area and the house was $600,000 you would be paying full stamp duty on the purchase price of $600,000.
So that can be a saving depending on your purchase price of you know any tens of thousands of dollars.
In summary the benefits are the tax savings, stamp duty savings and the ability to lock in a price.
Considerations:
There's always going to be an element of risk in buying off the plan, a couple of things that can happen is settlement is usually longer than what was anticipated so they told you at the time of signing the contract it was going to be 18 months it's not uncommon in this market for them to call you and say look it's going to be another 6-9 months, as the price is locked in this might not be a problem however depending on your situation it can have an impact and is happening quite a lot in this current market.
Another consideration with what's been happening in the news is we have seen a few builders& developers go into liquidation. One thing you don't want to be is in a position where you've signed a contract, you've paid a five or ten percent deposit a few months later you hear that the developer's gone into liquidation, whilst your money will be in trust it's messy and you’ll be left in limbo for a few months not knowing what’s happening.
When buying off the plan I’d advise to stick to the blue chips in terms of your developers and builders looking at larger developments.
Are if you’re looking at a smaller development check to see if construction has started, if a builder has been appointed, or has the developer achieved their pre-sales.
You will also want to see the builders track record of past projects as in some instances the new builds can be of poor quality.
Another considerationfor buying off the plan is sometimes there is a premium attached to buying offthe plan, as an example an established development where two bedroom apartments are selling for $550,000 and then there's a development across the road and their two bedrooms are starting at $670,000 then you are probably going to take a bath.
You don'twant to be in a position where you've signed a contract at $670,000, the place gets built you're all excited the valuer goes through and says it's worth $550,000,you've got to come up with the balance.
Benefits of buying established:
You know what you're buying, you can see it, you can touch it, you can smell it, you can get a building & pest inspection done.
You can also check the structural integrity of the dwelling and get an idea of any potential red flags.
Another advantage is the ability to get finance and settle, you can be in the property in a short period of time and not have to wait years to move in, you can move in 30-60 days from signing the contract, with off the plan you need to apply for finance when its completed, there’s no guarantee that you will get the finance then.
Considerations for buying Established:
No real tax advantages and in the cases with apartments we have seen some purchasers get caught out with levy’s for flammable cladding or levy’s to repair the structural integrityof the building, these levy’s can sometimes be 10’s of thousands of dollars so you really want to do your research.
That’s it I really hoped you enjoyed the video and article.
