When is buying New Build property a good idea?
If you are looking for a new home to live in, where the location is right and the price is fair, buying a new build can be a great way to lock in a beautiful new home designed to your needs and with a 10yr builder’s warranty.
When is buying a new build a bad idea? When you are buying out of an area you are familiar with, simply because the LVR rules are allowing you to buy again as an investment property with a lower deposit.
Far too many people have been tricked into buying overpriced ‘new builds’ by clever agents disguised as advisers who push the ‘cash flow’ pitch and claim that capital gains and equity growth will make their clients rich. When in reality, the builder has held onto all the margin and the agent has made a big commission selling you on the property they would never buy.
New builds can be great investments. If you want low maintenance and believe you really understand the market and fair value (so you do not overpay) then buying a new build in the right time of the property cycle has proven time and again to be a great investment. Just remember though, these properties usually come with less land to other properties of similar prices in the same area and they have very little scope for capital improvement (ie adding a bedroom or bathroom or doing some renovations to improve cash flow and equity) so you cannot build equity in them this way. You rely on the market continuing upward quickly unless you are a super patient investor.
Buying a new build on the outskirts of Hamilton or in Hawkes Bay if you are an Auckland investor is probably NOT a good idea because you will not understand the area, the builder will not give you a discount, the property could very well be vacant more than you expected which brings the yield way down… do not buy when you can, buy what you should buy when you can.
To see what equity and servicing options you have – take the mortgage snapshot which automatically calculates your purchasing ability, potential mortgage savings, or ability to top-up your mortgage.