July 26, 2017
A majority of property investors prefer to purchase older dwellings rather than new builds or off the plan properties, new data has revealed.
Mortgage Choice's annual Investor Survey found 76.9% of Australians intend to buy or have bought an existing dwelling, compared to 23.1% who bought a new build.
“Our data shows an increasing proportion of investors are choosing to purchase an established dwelling rather than a new build,” Mortgage Choice chief executive officer John Flavell said.
In 2015, 75.8% of investors said they intended to buy an existing property. In 2016, that number had risen to 76.7%, and now we know that almost 77% of investors would prefer an established dwelling.
“While only a small rise each year, this is a trend that I expect to see continue over the coming years. I believe we will continue to see an increasing proportion of investors choosing established dwellings over new builds, and there are a couple of reasons for that.
“Firstly, established dwellings are ready to buy and move tenants into straight away. Meanwhile, investors who purchase an off-the-plan property for example, may have to wait several years before they can access the property and, in turn, generate income from potential tenants.
“Secondly, depending on the location and the condition of the home, existing properties can sometimes be more affordable and provide property investors with more room to negotiate on price.”
“Thirdly, investors can renovate an older property, adding to the value of the dwelling over the longer term.
“Lastly, we have seen a few examples where the valuation for an off-the-plan property has come back short, leaving borrowers scrambling to make up the difference. Investors are acutely aware of this and, as such, are looking at all their property options before heading down this path.
“And while our data clearly shows that property investors are more inclined to buy an existing property rather than a new build, the level of building approvals continues to rise year on year.”
According to Australian Bureau of Statistics' Building Approvals data, 452,088 new dwellings were approved between June 2015 and May 2017, up 7.9% from the 419,130 dwellings approved between June 2013 and May 2015.
Regardless of whether investors ultimately choose to purchase an existing dwelling or a new build, Mr Flavell said it was important for borrowers to do their due diligence and research before making any final decisions.
“When it comes to choosing a particular property type, there is no right or wrong answer. Whether you choose to buy an existing property or a new build, it comes down to personal preference.
“You should buy a property that meets your current needs and budget, as well as the needs of your future tenants.
“Furthermore, the investment lending space has become increasingly complicated in recent months, with many lenders adjusting their policy and pricing. As such, it is critical that you speak with a mortgage professional who can find you the right home loan for your needs.”