487 markets join million-dollar property club: CoreLogic
Australia’s property million-dollar club has continued to grow, as new research shows that more than one in five homes...
Should you invest in a brand-new property, or opt for something second-hand? It’s a question that divides buyers looking to get into the property market, and there are a variety of pros and cons associated with each avenue.
Despite the more expensive price tag, many buyers find the lure of an immaculate property requiring minimal upgrades difficult to resist. Newer properties can be hassle-free, requiring less ongoing maintenance and can be purchased off-the-plan, sometimes enabling you to secure a value increase in the interim from the property purchase to its completion.
One of the other main benefits of buying a brand-new property is that you get a relatively large depreciation allowance as the wear and tear on the building, fixtures and fittings can be offset against tax. As second-hand properties tend to be fully depreciated, this benefit is not provided.
While new properties are an attractive purchase, you will often pay a premium for them. It can often be a better strategy to purchase a slightly older property and value add through renovation.
Inexperienced buyers can find it difficult to look past some of the less attractive aspects of second-hand properties and see how they can be transformed. A fresh coat of paint and recarpeting can cost as little as $5,000, and add around $10,000 to $20,000 to a property’s overall value if done well.
When renovating, it’s important to ensure you add value without over capitalising. Spending a great amount of money to renovate a property doesn’t necessarily equate to a higher profit.
It’s worth hiring a professional valuer to ensure you don’t overcapitalise or undercapitalise on renovations. A valuer can tell you if your $30,000 kitchen renovation will actually add $30,000 to your home’s value.
If you’re planning to carry out large-scale renovations, it’s worth hiring a good project manager who can look after the process for you.
A project manager can protect you from some of the risks involved in renovating alone (for instance, tradespeople capitalising on your lack of renovation experience). They can also often provide access to trade prices rather than retail, which can amount to significant cost savings.
Regardless of whether you purchase a new or second-hand property, you should always focus on buying properties that tick all the boxes – properties that are situated in blue chip areas, positioned away from noisy main roads and with plenty of natural light – as these will keep rising in value in the long term.
Property refers to either a tangible or intangible item that an individual or business has legal rights or ownership of, such as houses, cars, stocks or bond certificates.