Should you buy an established, new or off-the-plan home?

Established homes like 21 Research-Warrandyte Road, Research might be the way most of us buy a home — but is it really what’s best for you’re next purchase?

COVID-19 has been a game changer for Victoria’s property market, with many of us now rethinking what we want and need.

Internet speeds have become a consideration rivalling proximity to the CBD, developers and builders are working to design homes and apartments better suited for the post-virus world, and most of us have an acute awareness of the importance of our 5km community.

We’ve asked the experts to help you assess what type of home is the best bet for your next property move.

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Get the home you want, when you want it. There’s a reason the majority of home sales in Victoria are for established property.

But Barry Plant chief executive Mike McCarthy said the benefits of a ready-made home extended beyond knowing what it would come with and how the garden looked.

Mike McCarthy, director, Barry Plant.

Mike McCarthy believes there’s a reason most of us buy an established property.

“With established homes, by and large you know what neighbourhood you are buying into,” Mr McCarthy said. “You know the house that’s next to you and the people. And you probably like the look and feel of the street.”

And, despite high prices in many established suburbs, you are less at risk of overpaying in the eyes of your bank — who can force you to pay upfront the difference between the price you signed up for and their valuation.

“You are generally paying market value, particularly at auction — unless you have gotten really carried away,” Mr McCarthy said.

Established houses also tended to be on larger blocks than in a new housing estate, which meant there was scope to make your home work for you down the track either by subdividing the land, building a new home or developing the block, Mr McCarthy said.

Established homes also offer a chance to get a sense of your future outlook.

But there are some words of caution. Overpaying is still a risk, and with generally shorter settlement periods there is less time to save your way out of trouble.

“And you will need to get your building and pest inspections done, so you know what you are buying and don’t get any nasty surprises,” Mr McCarthy said.

Off the plan

Both investors and homebuyers might consider off the plan, but there are vastly different benefits for the two groups, according to Castran Gilbert director Michael Lang.

“Owner occupiers get the benefit of time,” Mr Lang said.

This stretches from the potential for capital growth at the property before they have to start paying a mortgage, but also means they will have more time to save for the home.

“There are also stamp duty concessions … you only pay this on 25 per cent of the value of the apartment,” Mr Lang said.

The 55 Hardiman St development in Kensington has a mix of townhouses and apartments with a New York vibe throughout

The 55 Hardiman St development in Kensington is a popular off-the-plan project.

For a $550,000 off-the-plan apartment, stamp duty for an owner occupier worked out to about $7000, Mr Lang said. For an established home with that price, paying the full 5.5 per cent in stamp duty comes up to about $30,000.

“And there’s also the chance to customise the design,” he said.

While investors might be waiting a while for a tenant and currently couldn’t claim stamp duty benefits, they were entitled to heavy depreciation benefits at tax time.

“You maximise your tax advantage, claiming depreciation on everything from carpets to fixtures and fittings,” Mr Lang said.

New houses

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Do you like free money? There is up to $45,000 in government grants on the table in Victoria if you build a new home.

The Savoy 40 by Porter Davis is one of the most popular new home designs on offer today.

However, Porter Davis general manager sales and marketing Shaun Patterson said government cash was just one of the major attractions to build a new house.

“The big one is you don’t compromise,” Mr Patterson said. “Whether it’s in the greenfield (estate market) or a knockdown rebuild, you get what you want and no one has lived in it.”

This means you can dictate what rooms are in your home, how they are oriented and everything from the colours to the type of stone used for the kitchen bench is as you want it from day one.

Add to that a home warranty from your builder that requires them to repair things that go wrong in the first 10 years, as well as a minimum-standard six-star energy efficiency, and a new house has the capacity to save you money long term.

In addition to looking great, newly built homes’ interiors are energy efficient.

“They are cheaper to run … and they are low maintenance,” Mr Patterson said.

If you’re already in a home and your block size and local planning guidelines allow for it, you can also build your dream home at the same address you’ve loved for years.

Investors might also appreciate a raft of depreciation options, and that many tenants prefer a home that’s never been lived in.

But if time is of the essence, it will work against you with most new builds taking several months to take shape.

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Stamp duty on off-the-plan builds, new land to be waived or reduced for 12 months in the ACT

Stamp duty on new land and off-the-plan apartments in Canberra will be waived or reduced for 12 months, the ACT Government has announced.

From today, Canberrans looking to buy single residential blocks of new land or off-the-plan apartments and townhouses up to the value of $500,000 will not have to pay stamp duty.

For off-the-plan apartments or townhouses that cost between $500,000 and $750,000, the stamp duty will be slashed by $11,400.

The scheme will run until June 30, 2021.

Concessions designed to boost new housing construction

Chief Minister Andrew Barr said the scheme was designed to boost the local construction industry, which has already seen about 1,500 workers lose their jobs, according to employment figures.

Yesterday the Federal Government announced it would give eligible Australians $25,000 to build or substantially renovate their homes, also in an effort to keep builders employed.

“This is important to put downward pressure on house prices and to see more houses built in the ACT,” Mr Barr said.

The scheme targets people in the middle of the housing market, those looking to downsize or those looking for a bigger place, according to Mr Barr.

“[It] will suit downsizers. It will also suit young families who need a bigger house because they’ve got a new baby,” he said.

“I think there is some pent-up demand from people who own units and townhouses who might want to move into a freestanding home and to buy a block of land and build their own house.”

‘Going to add a whole lot of confidence’

A close up of apartment balconies.
Chief Minister Andrew Barr says the scheme targets downsizers and upsizers in the middle of the housing market.(ABC News: Elise Pianegonda)

The Master Builders Association of the ACT said renovations and new home builds had dropped sharply at the beginning of the coronavirus pandemic.

“This is going to add a whole lot of confidence into the ACT housing sector right when it needs it,” chief executive Michael Hopkins said.

“Modelling undertaken by the MBA shows that measures such as this … will increase jobs, housing starts and inject up to $660 million into the ACT economy.”

Mr Barr said work on future projects had dried up.

The new incentives will run alongside existing stamp duty concessions for first-home buyers purchasing new and existing homes.

Amidst the economic downturn caused by coronavirus, house prices in Canberra gained 0.5 per cent in May.

Map of Australia showing home price changes in May 2020.
CoreLogic data on the home price changes for Australian capital cities in May 2020.(ABC News: Alistair Kroie)

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