• New or established: What is the safest way into the property market?

    New or established: What is the safest way into the property market?

    You don’t need an economics degree to know getting a foot on the property ladder is vital nowadays. But what’s the safest way into the market? New or established? Apartment or house? One-bed or two?

    Property guru, Frank Valentic, the founder of Melbourne-based buyers’ advocacy service, Advantage Property Consulting, shares his thoughts.

    Frank – known across the country for bidding on behalf of clients at auctions on TV show The Block– says there are pros and cons to weigh up with every property buying decision. 

    New or established, What is the safest way into the property market-Pic1 - open house 
    Many older homes promise character and charm, which can have timeless appeal and lasting value. Picture: Erinna Giblin

    Pros of established property

    Frank says the choice between new or established is especially interesting for first-time buyers.

    “Established properties can have timeless appeal. The rooms are usually bigger and the construction is usually more solid, so therefore long-term viability and maintenance with an older style property can stand the test of time,” he says.

    “With an older style property, you have historically achieved capital growth and often those properties have more land value,” Frank says.

    “If they are apartments or units, and it is a small block, they have more land value and the land appreciates, while the buildings depreciate, therefore they usually get more capital growth and better re-sale value,” he adds. 

    It’s also possible to “value add” to old properties with small renovations. “The older style properties have tended to double, in many instances, over a seven to 10 year period,” Frank says. 

    Pros of new homes

    “In some states, like Victoria, buying new comes with a $10,000 bonus, care of the state government.  However eligibility criteria apply to each state’s grants – you can find out more about the requirements on the state governments websites. Off-the-plan and newly built properties also feature structural warranties too,” Frank says.

    “Like buying a new car, you have the warranties as a back-up,” he says.

    “There will also be less maintenance, as it is a brand-new property, apart from some initial defects, which are usually fixed. There is not a lot of maintenance,” Frank says.

    New or established, What is the safest way into the property market-Pic2 - townhouses on river 
    A brand new property usually comes with less maintenance than an older home. Picture: Kate Hunter

    Weighing it up

    There could be negatives to new though, Franks adds. Over-supply is the biggest one. 

    “With new apartments and townhouses, there is a constant supply of new properties hitting the market. And there can be 20,000 to 30,000 competing [against one another] and often there is not much capital appreciation over time,” Frank says.

    New tends to go for a premium price too, he says, because the developer’s profit margin is built into the price. This means buyers sometimes pay above market value. 

    Whether to go for an apartment or house, or one-bedroom or two, comes down to budget and the market.

    Frank subscribes to the “keep it simple, stupid” school of thought and advises first home buyers to purchase something small and ease their way into the market, rather than over commit.

    “Rome wasn’t built in a day and it’s about taking smaller steps and building up from that,” he says.

    New or established, What is the safest way into the property market-Pic3 - open plan apartment
    Property renders can be enticing, but research is key when it comes to buying off-the-plan. Picture: realestate.com.au/buy

    When off-the-plan makes sense…

    Bonnie Caine, a 29-year-old account manager who currently shares with four others in the trendy Sydney suburb of Balmain, took her first big step into the property market a few years ago. 

    With the encouragement of her older brother, who is a financial planner, Bonnie purchased a one-bedroom apartment off-the-plan in a large development in the Sutherland Shire, for just under $600,000. It will be ready early next year.  

    Bonnie saved her 5% deposit by working like a “crazy person” for several years, doing three jobs, sometimes seven days a week. She knew from a young age she wanted to own her own home. 

    “Growing up as one of six kids, we didn’t have much, but I think it made us, my brother especially, work extra hard. I’ve watched him be successful, own several properties, and I knew it was something that I wanted too,” she says. 

    Bonnie says in a pricey market like Sydney, buying off-the-plan made sense.

    “While it’s really strange to hand over this big deposit and effectively get nothing back for it, buying off-the-plan has been a good choice for me. I’ve heard reports my place could be worth close to $700,000 already and it’s not even built yet, which is just amazing.”

     

    Originally published on flatmates.com.au

     
     

    About the author

    • Raymond

      Raymond A Ram is the RAMbassador for RAMS Financial Group. Raymond works with the RAMS team to bring simple, helpful and expert information on home loans and savings accounts to life with his down to earth and cheeky personality. He enjoys seeing everyday Australians turn their dreams of saving for a goal or getting into a home a reality. 

      Growing up in Goulburn, NSW, Raymond was brought up with good old-fashioned Aussie values of hard work and a fair go. It soon became apparent that Raymond wasn't content for the conventional path of grazing, producing the very best wool, and finding a nice sheep to settle down with. So it wasn't long before his passion for performing and his talent as a likeable larrikin shone through - landing him a few roles such as 'RAMlet'. He was even tipped to play RAM-bo at one point but chose to become star of the small screen instead as RAMbassador for RAMS. He now finds this role so much more rewarding.

      Contact your local RAMS Home Loan Centre about your home loan options.

      Raymond A Ram
     

  • Check out our latest offers

    Find your local RAMS Home Loan Centre

  • Disclaimer:

    The information here is of a general nature only and is not intended to constitute financial or tax advice. You should consult your professional adviser, accountant or taxation expert for advice specific to your personal circumstances.

    The views and opinions expressed in this article are those of the author alone and do not necessarily represent the views or opinions of RAMS Financial Group Pty Ltd ABN 30 105 207 538 (RAMS),  Westpac Banking Corporation ABN 33 007 457 141 (Westpac) or their related bodies corporate. This article is strictly for information purposes only and neither RAMS, Westpac nor any of their related bodies corporate make any representation as to the accuracy or completeness of the information in this article or endorse the views expressed in it.