By opting for new vs existing homes, savvy investors could save time and money while enjoying a wide array of benefits.
In general, regardless of the segment, investors aim for maximum returns with minimal risk. Traditionally, existing homes have been favoured, but they often come with potential maintenance issues as they age.
Many savvy investors are now favouring brand new homes to maximise their returns over the long term.
Increased demand and tight rental conditions are driving price growth.
The 2024 housing market context
By mid-2024, strong housing demand, tight rental conditions, and renewed investor activity have created a dynamic environment for property investors, especially in affordable markets seeing significant price growth.
Navigating these trends is crucial, as "time is money" still applies, but a longer-term view is always useful when considering what to invest in.
Despite a short-term income gap during the construction phase, new builds offer long-term advantages like reduced maintenance costs, improved efficiency, and modern standards, making them a potentially smarter choice for sustainable returns.
We've explored the implications for new home investments in 2024 and beyond.
5 benefits of the new home market for investors
Before diving into the new estate market, investors should understand how it functions.
There are multiple options to suit investors, from house and land packages in brand-new neighbourhoods to knockdown rebuilds in established suburbs.
Here's what to know about new home investing:
1. Tax time brings potential benefits
New homes offer tax advantages, shorter settlement periods, and lower long-term maintenance, often making them more cost-effective compared to existing properties.
"As an investor, buying a new home instead of an existing one provides significantly higher depreciation allowances.
"While old houses offer minimal depreciation, new builds can allow some investors to claim up to $10,000 or more annually in taxable benefits," explained Nick Allan, Sales and Marketing Manager at Domaine Homes.
2. New estates can mean healthy capital growth
Brand new suburbs can be attractive to investors (as well as first-home buyers) due to the potential for capital gains by entering the market early, before these areas become popular and rising demand drives up prices.
Keen to get in on the ground floor of an investment? New estates can be appealing.
New infrastructure draws new communities as roads, shopping complexes, schools, and jobs expand further from the CBD to accommodate growing populations.
Recently, the NSW state government has reformed planning laws to enhance efficiency and accelerate approvals, investing $200 million to support councils in developing the necessary infrastructure.
“We have 12 consultants across key growth areas in New South Wales, who are aware of future infrastructure developments in these areas. They specialise in council compliance requirements for housing, which differ in each LGA, and they are knowledgeable about opportunities for top rental returns,” explained Mr. Allan.
Developments with access to high quality and accessible amenities and public transport are favoured over those without.
Furthermore, with the design process pre-priced and ready to go, hidden costs are rare in new estate builds compared to buying land outside a new estate.
New estates offer comprehensive packages with clear costs upfront, helping to avoid surprises like extra development fees, architectural consultations, or unexpected site issues. This makes the whole process smoother and more predictable, giving homeowners greater peace of mind.
3. Knockdown rebuilds: Charm of old neighbourhoods, perfection of new homes
Unlike existing homes, new homes allow buyers to personalise the space, from floorplans to the choice of appliances and colour palettes.
The obvious benefit of investing in a knockdown rebuild is that the neighbourhood is already established, making these developments attractive to investors who don’t need to wait for infrastructure to follow.
Domaine Homes offers click-on options at the design stage, allowing buyers to select from a variety of designs and make changes without stress.
“There may be up to a dozen options a buyer has selected in the design. This means that every time we build the home, if there aren't any custom modifications, it doesn’t need to be redrafted or re-costed. It’s already done,” explained Mr. Allan.
“All our options are pre-costed for each click-on modification. This enables us to deliver quicker builds because the designs are already in the system and known to our suppliers.”
Looking for modern amenities in an established neighbourhood? Knockdown rebuilds can help.
3. Choosing quality and guaranteed construction
For first-time investors considering whether to go with a developer, the on-time completion of properties is crucial for seeing returns sooner.
This often hinges on strong relationships with tradespeople, contractors, and manufacturers—a significant advantage when choosing a developer like Domaine Homes.
Investors will appreciate that developers like Domaine Homes ensure budgets are respected without compromising on quality. Additionally, a lifetime structural guarantee offers peace of mind at the time of purchase and serves as a compelling selling point when it’s time to sell.
"Domaine Homes provides a lifetime structural guarantee, reducing concerns about aging house costs."
In fact, Domaine Homes' quality construction paired with fast and reliable turnaround has created a loyal customer base, with about 30% of their investor clients choosing to return for future investments.
This high rate of repeat business highlights the confidence investors have in Domaine Homes' efficient processes and dependable results.
4. Sustainability is baked in
Unlike homes built in decades past, sustainability plays a crucial role in new home designs. Incorporating sustainable features not only lowers utility bills but also future-proofs the home.
Furthermore, renters are increasingly choosing homes with lower living costs, making features like solar panels and BASIX certification (which ensures water and energy efficiency, as well as thermal performance) especially attractive to both tenants and investors.
5. Comprehensive service from the get go will save time
Comprehensive services, including financial advice, investment location consulting, and color palette selection, streamline the home-building process.
Building a new home can feel overwhelming, but reputable developers streamline the process by offering comprehensive services from start to finish, making the entire experience much more manageable.
“Our streamlined process means colour selection takes about 90 minutes on average, compared to a whole day with other builders. Plus, everything is pre-priced, so there are no surprise bills,” Mr. Allan explained.
Efficiently managing the build process is essential for investors aiming to start seeing returns sooner.
4 key strategies for investors
Investors need to be strategic to minimise risk and maximise growth opportunities, whether building a future home, investing through rentvesting, or adding to their portfolio.
Unfortunately, immediate returns on investments are rare, which is why property investment—like any other form of investment—should be approached with a long-term perspective.
Here's what to know:
1. Research and due diligence is crucial
Seasoned investors stay ahead of trends, buying in developing suburbs at reasonable prices to let properties appreciate over time.
Researching high-growth neighborhoods and expanding infrastructure is essential.
Tools like realestate.com.au’s insights and data from PropTrack help investors analyze growth statistics and make informed decisions.
Most crucial of all, however, is getting independent financial advice on your personal circumstance.
2. Be across government incentives
While incentives for investors are fewer than for owner-occupiers, opportunities like the First Home Owner (New Home) Grant do offer benefits.
This $10,000 grant requires the buyer to live in the home for 12 months before renting it out, turning it into an investment.
3. Have a long-term vision
Investors need to understand the growth potential of a suburb and build homes with features that withstand the test of time.
Investing in up-to-date appliances, durable materials, and sustainable features helps homes maintain value and appeal to future buyers.
4. Rental market appeal matters
Investor success often hinges on appealing to the local rental market. To attract quality tenants, homes should be conveniently located, affordably priced, and equipped with top amenities.
Properties located far from essential services often struggle to attract tenants, making developments with existing amenities much more appealing as investments.
Additionally, older homes that are expensive to heat and cool, have outdated appliances, lack aesthetic appeal, or require significant repairs are becoming increasingly less likely to attract quality tenants.
By considering these factors, investors can make informed decisions that ensure minimal risk and high returns.
This article was originally published on 16 Sep 2024 at 3:44pm but has been regularly updated to keep the information current.
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