WHY BUY A NEW BUILD?
After several years of double digit capital growth, the steam has finally come out of the housing market. With inflation now running at 7.3% per annum, the Reserve Bank has embarked on a process of sustained interest rate rises which combined with geopolitical factors the war in Ukraine etc and tightening bank credit has resulted in the inevitable drop in both activity and prices in the NZ housing market.
So why would you look at a NEW BUILD as a viable option?
For several reasons –
1) The tax breaks for investors that the government introduced last year are still in place where Government are incentivizing purchase of off plan property. This includes a 5 year bright line test rather than 10 years for existing property. Investors can also claim interest as a deductible expense, which can have a significant impact on the viability of an investment property. Purchase of existing property does not allow interest deductibility.
2) Once a NEW BUILD is defined as a NEW BUILD, this status runs with the property for 20 years from issue of the CCC regardless of ownership. This in itself may well protect and enhance the value of the property going forward.
3) Banks lend to 60% LVR ( loan to value ratio ) on an existing investment property but will lend to 80-90% LVR on NEW BUILD investment property depending on individual investor circumstance. The lending criteria for owner occupiers can often be higher… up to 90% LVR.
4) HEALTHY HOMES – has recently been introduced and requires tenanted property to reach a mandated standard. This standard can be costly for existing property to comply with, where NEW BUILDS will often comply or require little additional extra cost.
5) While interest rates are currently on the way up, depending on the completion date of a NEW BUILD, you may well find that at settlement date, long term rates may be on the way back down. Banks tend to issue loan offers close to settlement rather than at the initial stage of signing the contract.
6) NEW BUILDS tend to have lower Body Corp figures, higher rental than the equivalent existing property and of course, built under the latest building codes
For further information, please contact www.propdup.nz or call 0800 PROPME, 0800 776 763