To buy an established property or a new-build home - which is a better investment?
Category Advice
With low-interest rates, preferential lending from banks and more negotiable property prices making this an ideal time to buy, buyers will be asking themselves what type of property would make a better investment? To buy an older home and fix it up or buy new? Buyers need to determine where they are going to get the best value for their money and what their priorities are.
There are pros and cons to buying both an older home in a more established neighbourhood or a new-build in a more up-and-coming area, but the most important thing is that buyers are clear about their motivation for buying and how that property would suit their lifestyles. For those who want to realise good value on their investment, take into account the advantages of each option.
New build home
Benefits of buying a new build home
New build properties appeal to many buyers for several reasons. Firstly, there is no transfer duty to pay, which is a huge saving on the overall cost of purchasing a home. Buyers, oftentimes, have input to the final look and feel of their home by choosing finishes that they prefer, which gives them an opportunity to put their personal stamp on it. New build properties are also more practical in design, with a focus on space and energy efficiencies, reducing consumption costs. Being new, there will also be little maintenance required. New developments incorporate more desirable modern designs and finishes, and most purchasers prefer the latest interior trends such as vinyl floors, larger tiles, open-plan kitchens, gas stoves, wall hung toilets, and frameless walk-in glass showers.
Disadvantages of building a new house
- New developments and vacant stands are mainly on the outskirts of major urban areas, which may be a disadvantage in terms of security and accessibility to major roads and necessary amenities.
- The future development of major arterial routes may add to noise and other pollution and the development of low-cost housing or the formation of informal settlements on vacant land in the near vicinity may cause property values to stagnate or even decline.
- You cannot be sure about your privacy if your neighbours still have to build their houses around you.
- Major additional expenses for an architect or engineer, land preparation or excavation with unforeseen ground formations, and so on, may need to be taken into account.
- There may be uncertainty about the quality of workmanship and material to be used.
- The building project may take longer to complete than anticipated, which will create problems for you in terms of an occupation date.
- Stand sizes are generally smaller than those in established older areas.
An existing property
Benefits of buying an established home
Older properties are generally located in established areas, so it gives buyers an opportunity to reside in popular built-up areas in a central location. Such areas are sought after because of their access to schools, shops and natural drawcards such as beaches and mountain reserves. Erf sizes are usually much bigger and afford buyers the ability to add additional value through improvements.
A larger plot size gives the buyer the chance to improve on the property by, for example, adding another bedroom or granny flat, installing a pool, fixing up the garden, or building additional garaging. Compared to new-builds, where your house takes over the stand and there isn't much room to play with, a large plot gives you the freedom to add value in a variety of ways.
There are still good buys out there for people who want to purchase older homes to flip and resell, but you really need to buy right to make your money over the short-term in the current market. Both sides of the coin, new or old, have their advantages and will realise value but buyers need to make a decision on what is right for them based on their lifestyles, budget and desire to do maintenance and repairs.
Disadvantages of buying an existing house
- Houses in the neighbourhood may have a negative effect on the property value.
- Older properties are sold 'voetstoets' without a warranty.
- The design, layout and finishes may not be in line with your personal taste or the latest fashion trends, and renovating may be too costly.
- Defects may be invisible at the time of viewing, and could end up costing you a lot of time and money in repairs.
Author: Property 24 - Extracts
