#2 – Renovations
A big difference between New Builds and existing ones is the ability to renovate. You can renovate an existing property to increase its value.
However, this data only looks at the value change in the properties.
Let’s say you bought a $500k property that you renovated and sold for $600k.
In this data, that would look like $100k in capital growth. Even though it isn’t.
So this means that the data for existing properties is biased upward. Some of the increases in value for existing properties will come from renovations, not natural market movements.
#3 – Maintenance costs
Existing properties have more maintenance costs than a New Build.
A New Build might have $500 for maintenance a year. An older property might need $1000 - $1500 in maintenance per year.
If we’re talking really old properties, you should keep at least $3000 a year aside.
So, in some cases, existing properties might go up in value slightly faster (0.6%). But if you’ve got to pay a bit more maintenance, you might not be any better off.
#4 – Government regulations
Government rules and regulations will have an impact on property portfolios.
For example, debt-to-income ratios (DTIs) are about to come in (July 2024). These new rules will make it easier to invest in New Builds rather than existing properties.
Loan-to-value ratios (LVRs) say investors need a 35% deposit to buy an existing property. But New Builds are exempt – you only need a 20% deposit.
So with New Builds you can buy more properties and get a similar capital growth rate. For some people, that will make them a better investment.