Old and new properties have advantages and disadvantages. Your choice will depend on your financial situation and your long-term goals.
But when it comes to the serious things, what are the advantages and disadvantages of buying new properties over existing ones?
Existing properties have a lot to offer. They tend to have bigger rooms and, if not further subdivided, much bigger gardens, which is great for attracting long-term renters like families. They also offer character and charm, a quality often lost in new constructions.
When it comes to researching suburbs and property types, you can display decades of sales and rental trends in one click to get your attention.
Another significant benefit of well-established homes is that you have the power to negotiate the price and / or inclusions, especially if you meet highly motivated salespeople who want to move quickly to something else. built by the developers, or by buying the plan.
Downward? Old properties may seem tired and may require significant modernization and renovation costs. Things crumble, collapse and fall, and you'll put your hand in your pocket to pay even more tradies bills.
You may be able to claim some of these repairs as tax deductions on investment properties, but it's always a good idea to discuss them first with your accountant or financial planner to find out exactly where you are. .
What about new properties? It is easy to look at their bright exteriors and high-tech inclusions, but these properties carry their own risks. If you are buying a brand new home in a new property, the rental market is an unknown quantity – you will not have reliable figures on the median rents or vacancy rates you can count on.
You may also find that local services and amenities are catching up with population growth, and the lack of good schools, transportation and businesses could deter potential renters. Properties hastily destroyed by developers may also have a reputation for being poorly executed and having defects, which may require you to request repairs faster than you would like.
On the plus side, the new properties offer better benefits in terms of depreciation to investors in the current tax system and may be more attractive to tenants than old ruined cities.
You also get a little more protection from major defects and defects, as builders of new properties must make sure that they are covered by the house warranty, while if you buy an existing home, it is up to you to be diligent and to organize inspections. to check for such problems.
And if the property is well built, you will probably have less maintenance costs than in an older, dilapidated house.
The negatives of the old and the new
The question is somewhat complicated by polls in Canberra, which reign supreme over the legislation that makes real estate investing a proposition as appealing to ordinary Australians.
Of course, this legislation is a negative strategy and, if ALP were to win the elections in May, it would propose a major overhaul of the rules in force. Their amendments will include limiting the negative gear to newly built properties that are added to existing housing stock, which means you will no longer be able to claim negative depreciation allowances if you buy an existing property as a new home. 'investment.
They also plan to reduce the capital gains tax exemption by 50% to 25% in order to help more first – time homebuyers gain access to the property. 39 scale of the property. This move will mean that investors pay the taxpayer a much larger share of the profits from their property when they sell.
With all these potential upheavals, it's more important than ever to explain clearly why you're investing in property and what your long-term goals are.
When buying an investment property, it is better to consider the tax benefits to which you may be entitled at that time as an additional bonus, rather than as your primary investment objective.
Instead of focusing your strategy on the downside, think about how the value of the property will grow over time and how you will use that equity to build your wealth. So, if legislation or conditions change along the way, or if you no longer have the taxable income required to take full advantage of benefits such as negative gears, your real estate portfolio will remain a valuable asset, even if you do not can no longer use it's like a tax deduction.
What must be remembered is that if you believe that a property, old or new, is best suited to your investment strategy, the better you can start early and start building your wallet, the better. The Aussie / CoreLogic report on 25 years of housing has examined the Australian real estate market over the past quarter century, revealing that since 1993, the median value of homes in Australia has jumped by 412%. During this period, unit prices also saw stellar growth in the order of 316%. This represents an annual capital gain of 6.8% for homes and 5.9% for units.
While there have of course been growth cycles, flatter periods, and a few drops in value, these results demonstrate that property remains one of the best ways for wealth creation.
Compare these results to the stock market and they look even more impressive. Aussie and CoreLogic found that the ASX All Indexes Index had increased by only 261% over the same period, which is well below the huge yield offered by the property. If the trends observed over the past 25 years continued until 2043, the median price of real estate in Australia could reach $ 2.9 million, with housing close to $ 2.1 million !
As you can see, there are huge long-term capital gains on real estate investments, especially if you buy earlier than expected, which will give the property more time to take over. the value.
Especially in the current real estate climate, there are plenty of bargains to do around Melbourne and Sydney, making it the perfect time for investors to add to their portfolios. And as the elections are not yet decided, this could be one of your last opportunities to enjoy tax benefits via a negative ratio – regardless of the type of property you choose.
