My fiance and I have been looking at buying a property and obviously their are the two options;
1. Buy an established house
2. Build a houseWe are looking to gain as much capital growth as possible.
I have noticed that established homes in an established area tend to be more expensive than if you find a block of land and build on it…therefore we have been leaning towards taking this option.
For example in one area a 4Br/2bathroom/2 garage established home is for sale around $550,000 but there are a few house and land packages that are available for around $440,000 to $500,000. Therefore could you reasonably assume once the building of the home is completed it would then be valued at around $550,000??
Anyone got some insight into this??
Do people prefer to buy established homes?? rather than build??A point to note, this only seems to be the case in established areas, not large new estates..
You need to find out what is included in the building base price s often it does not include floor coverings, driveways, landscape, clothline, window dressing, dishwaher, prepare the land site, garage roller door, light fittings and the list can go on and so can the exta money you need to add. This will cost more time and money to organise.
Where an established home you see what you are getting and all the above are included. Also you save time and money iawhile you build you need to make progress payments and incur interest wile building and the rent is coming in for up to 9 months while its being built.
PLus in building you only pay stam duty on the land cost, where established home you need to pay stamp duty on the full purchase price on the house and land.AnthonyJF
Agree with above.
New estates usually take a long time for house prices to rise over time, also usually located out away from rail and shops etc.
New house will generate more deductions over a longer period, but I think I would go for a near new home rather than get one built and have big hassles with building and never ending bills for things you just get for free ( not quite but you know ) with an established house.
new houses have the benefit of being able to claim depreciation on the building costs of 2.5% each year till 100% of depreciation is reached. If you are using the property as an investment.
However this causes capital gains to increase as the building reaches zero and the cost base is decreased by the depreciation."I would go for a near new home" – You can still claim this depreciation
where as an older house may not be eligible to claim depreciation and will be harder to work out what the building costs where in the year it was built.AnthonyJF wrote:For example in one area a 4Br/2bathroom/2 garage established home is for sale around $550,000 but there are a few house and land packages that are available for around $440,000 to $500,000. Therefore could you reasonably assume once the building of the home is completed it would then be valued at around $550,000??First, the established house for sale at $550K could probably be yours for $530K or less. The H&L package probably needs another $50K-$100K before is comparable to the established house. Then you have to look at the time it takes to build and the rent you pay on your current place plus the usual problems and extra costs you may encounter with your builder along the way. Once you take all costs into consideration its usually cheaper to buy established and save your sanity plus a few years of waiting for any CG growth to occur. Unless you have a special block of land or want to build the house yourself there is no financial incentive to build a standard house in a new estate over buying a near new house in an established estate.
In new estates there is a much larger percentage of people who overstretched their budget to buy, didn't consider traveling distance to work , breakup marriages caused by building or financial stress, etc. so there is a larger proportion of sellers willing to get out at any price then in established suburbs. That alone will cap any capital gains for a few years, then just when you think the sellers are getting scarce and its time to put your property on the market and get out at least what you put in and maybe a bit of return on your time and effort a developer will release a few hundred blocks of land near you and stuff you up for a few more years.
I agree with the other posts, for the best CG I'd look for a near new house in an established suburb and in an area where developers already released all the land available.
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