Buying a home in a new development can offer financial advantages to purchasers such as no transfer duty and cheaper initial prices, often below market value, say experts. But buyers must do their homework as the off-plan route isn’t for everyone.
Property buyers have a number of things to consider when choosing their new homes, and one of these is to decide whether to buy an established property or build from scratch.
There are pros and cons to both choices, although some financial benefits come with new property developments. These include the savings made on transfer duty and the fact that new homes come on to the market at between 10% and 20% below market value, says Stephen Porteous of SDP Consultants.
This lower price is a result of developers being able to sell 30 or 40 homes in a fixed time. And he says buyers have extra peace of mind when buying new buildings.
“Even if the developer or the contractor has problems you will have the assurance of the National Home Builders Registration Council to back up your building.”
Additional benefits of new builds
“What’s great about buying off-plan is you often have a greater selection of options versus what is immediately available in the market,” says Jacques van Embden, managing director of Blok Urban Developers.
“You’re also locking in today’s pricing for tomorrow’s value. One only needs to put down a deposit at the outset and secure the balance of the funding either with a guarantee or a larger deposit and can then use the construction period to save for the ensuing costs or to dispose of your existing home.”
Lance Gore of Spencer Gore Developers says developments take into account the current thinking in terms of architecture; finishes; energy and water-saving measures; facilities and data provision, among others, which older developments don’t, or can’t, provide.
“The cost of retrofitting an older development is costly whereas incorporating new technologies into a new development is cost-effective.”
What to be wary of
There are, of course, risks when buying at any time as the market could move downwards as has happened on numerous occasions, Gore notes.
“There are teething issues when you buy into a new development but they are relatively minor by nature. Established developments have the advantage of price and operational structures, but you give up on some of the more modern technologies that a new development provides and you are buying an older asset with higher maintenance costs.”
Buyers must also do some research on the developers to ensure their track record on past projects is good.
Other risks include unforeseen delays or not getting what you thought you were buying.
“This can be reduced, though, if you read the documentation properly,” he says.
Van Embden agrees: “It’s always important to understand your contract, as well as ensuring you are familiar with the team you are getting into business with at the end of the day.”
Buyers must be mentally prepared for snags that might need to be attended to as well as building work going on around them for a while, Porteous says.
“The upside is that you get to find those pesky snags and get them dealt with.”
Choosing the right new development
Look for the location that will be central to your life, be close to good schools and maintain its value, he advises. “When the locality checks these boxes it will also be the locality that will offer the best potential rent if your circumstances change and you want to let the property.”
Echoing this, Gore says choice is about a lot of things including location, price, levies, design, finishes, proximity to transport routes, shopping, schools and medical facilities.
“These, plus many other factors, play an important role in the decision-making process.”
Each development will offer unique opportunities and the buyer needs to consider what best suits their needs in terms of offering and development partner, says Van Embden.
Buying into the right estate
For buyers wanting to live in an estate, he points out ongoing maintenance costs and monthly levies are sometimes higher in estates (as opposed to other new developments) due to the scale of the shared amenities.
“Of course, it means you also get to enjoy a selection of shared amenities with other estate dwellers.”
However, Gore says estate living is not for everybody.
“There are sometimes quite restrictive rules in place on an estate which does limit what a person can do. Some people are not happy on an estate so, before buying into one, make sure that you understand the rules.”
Summing this up, Porteous says: “Look for a well-run estate with happy people.”