Buying established vs new build? Unpacking the pros and cons

Which suburb, how big, a unit or a house? Decisions decisions...There’s a lot to weigh up when you’re starting out on your first home journey and one of the first decisions you’ll need to make is whether to buy an established home or a brand new build. 

Let’s unpack some of the pros and cons to help you decide which option might be best for you.

Option 1: Buy established

Some of the pros:

• Higher land value - Ummm, what? The land to asset ratio of a property is the proportion of the total purchase price that’s made up of land value vs the actual house or unit. With established homes, the land value component is usually higher, since the value of a home may depreciate over time while the land value may appreciate, the potential for capital growth over time is generally higher too. 
• Value add prospects - Keen to try your hand at some renos or DIY? Established homes will typically give you much more value add potential since there’ll be room to upgrade, refresh or even make major improvements.
• Record of past sales  - Established homes and units can be a lower risk investment since they are a known entity with a track record of past sales that can help you to estimate future capital growth. 
• Existing infrastructure  - With established properties you generally get the value-add of infrastructure like established gardens, yard improvements, sheds or other equipment as well as the community amenities that come with buying into an established suburb. 

Some of the cons:

• What do you prefer? - If you plan on being an owner occupier, it’s important to think about your personal tastes and preferences too. If you like mod cons then buying new could be a better choice for you.
• Maintenance and repair - Depending on the age and condition of an established property, you’ll have to budget a little, or a lot, for ongoing repair and maintenance costs. 
• Better rental prospects - If you’re planning to rent out your property in the near future you’ll need to think about rental yield and tenant appeal. And on both counts established or older homes may not perform as well as brand new homes will.

Option 2: Buying a new build

Some of the pros:

• Stamp duty savings – Depending on which state you live in, with a new build you potentially won’t have to pay stamp duty on the house itself, only on the land, so you could benefit from some significant savings in that department.
• Low maintenance - Newer builds will generally be lower maintenance in the short to medium term so you’ll be much less likely to have to pay for major repairs or maintenance like new roofing or re-painting. 
• Tax perks - Looking to rent your property out in the near future? With a new build, you may be able to claim depreciation costs on things like furnishings at tax time. 
• Rental yields - For prospective landlords, a new property may offer you a higher rental yield than an established or older style home and be more appealing to prospective tenants too.

Some of the cons:

• Upfront purchase cost - New builds could potentially be more expensive upfront than older homes so depending on which state you live in and your budget, buying established could give you better bang for buck. 
• Lower capital growth potential - Generally speaking new builds have a lower land to asset ratio than established homes, and because the land is the component that may appreciate over time, while the dwelling itself may depreciate (much like a new car), there could be less potential for capital gain.
• Lack of infrastructure - You may not benefit from the same value-add in terms of established infrastructure as you would with an existing home in an established suburb.
• The unknown - New builds are often considered higher risk in terms of their capital growth potential simply because you won’t have a sale history for the property or complex to help you estimate what growth could look like in the future. 
• Less room to add value – You typically won’t benefit from the value add potential that can come from renovating, improving or DIYing an older property to increase its appeal and resale value over time.

Keen to explore some home loan options?

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

Need a little extra guidance? Our Lending Specialists can help you weigh up your options and find the best value home loan for your needs, not someone else’s.

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