You can easily choose what type of property to buy or invest in with the proper advice. Like everything else, both ready-to-move-in homes and apartment blocks still under construction have their pros and cons.
It’ll be a great idea to seek the opinion of a Certified Practicing Valuer in Victoria before making an investment decision. They are familiar with the local property market and its trends, making them the perfect professionals to seek advice from.
Before unpacking the advantages and disadvantages of both types of property, let’s first differentiate between the two.
Ready-to-move-into flats and houses are completed building projects that passed building inspection. The building inspection will give its owners the green light to put the property on the market. You’ll also gain instant ownership of the property should you choose to buy it.
Under-construction properties are still in development or being built. It is a popular choice for individuals with a lower budget and no urgent need to move into a new house any time soon. The building completion usually takes years. Then only can it be marketed and occupied.
Now that we know the differences between the two kinds of buildings, let’s evaluate their pros and cons.
Pros and cons of under-construction property
All kinds of real estate investments come with their benefits and disadvantages. Residential property still under construction is no exception.
Investing in residential real estate is a big and possibly life-changing decision. One of the reasons is that it involves large sums of money that you’ll probably need a mortgage or loan for. These are long-term responsibilities you’ll need to carry. Knowing what you’ll be walking into can help enlighten you and drive better decision-making.
Now, let’s have a look at the benefits and risks associated with under-construction properties.
What are the benefits of investing in a property under construction?
- Goods and Services Tax benefits. Since properties still being built will be marketed as “new” upon completion, investors are entitled to GST credits.
- Low initial costs. You’ll pay in instalments over the period it takes to complete the building project, technically contributing to the funds needed for construction.
- High-profit margins. Although the risks are lofty, the potential for higher profits will increase once the property is completed, suitable for occupation and put on the market.
- A brand-new living space. A sense of accomplishment and an opportunity to make a fresh start both come with buying a new home.
What are the risks of buying into a property that is under construction?
All kinds of investments come with risks. Investing in a property still under construction has many since there is no actual property yet. Let’s take a deeper look.
Firstly, although you are paying, you won’t have ownership of the property yet. Getting expert advice and doing extensive research will spare you from investing with a contractor or building developer known to rip off investors and not follow through with agreements or promises made. A deal that seems too good to be true probably is and should raise red flags. You’ll need to do your homework first or avoid it and explore other options.
Secondly, you’ll need a lot of patience. Construction is a lengthy process, especially when blocks of flats are being built. The chances of the project getting delayed are also high. Factors like weather, insufficient funding, a shortage of skilled builders, a breakdown in the equipment, worker strikes due to unfair pay, and the list goes on.
Other risks include:
- Not being able to get loan security or insurance because of the enormous risks involved
- Having to pay over an extended period with higher interest rates if the building doesn’t go according to the planned timeline
- Incurring extra costs to remodel the property if you’re unhappy with the final product
- Wanting to withdraw from the investment because of a change in personal plans, like relocation for a job, school, etc
- Poor quality construction that leaves the building unsafe to occupy or depreciates its value as time passes and it ages
- The termination or abandonment of construction is always a possibility due to structural failure caused by human error, natural disasters, or just a lack of funds for completion.
Advantages and disadvantages of ready to move into properties
Let’s first unpack the advantages of buying houses and flats that are available for immediate purchase.
A well-favoured advantage is that you’ll have complete and immediate ownership of the property. It comes with the freedom to make changes or renovate the property without asking for permission first.
Buying a house or apartment also relieves you from paying rent. So, should you lose your job or be unable to generate an income, at least you’ll still have a safe and comfortable place to live until you get back on your feet.
You’ll also have the chance to view the house or flat you’re interested in before buying it. What you see is what you’ll get. Other perks of ready-to-move-in residential property include:
- More long-term savings since rent is more expensive and less sustainable in the long run.
- You’ll have tangible assets to your name and have something to pass down to your family.
- If you are the provider for your family and anything happens to you, they will still have a roof over their heads.
- Privacy and security are guaranteed if you own your property and aren’t sharing or renting.
- If you have an extra room or even a garden cottage that isn’t in use, there is an opportunity for a rental income.
The disadvantages include higher start-up costs, long-term home loan repayments, real estate taxes. You’ll also be fully responsible for any maintenance and utility bills.
Which is a better investment option: under construction or accessible property?
There is no telling which investment option is better because everyone’s needs, financial situation, and personal preferences differ.
Your funding options and your credit score will ultimately determine which type of property you qualify for. You can opt for renting a readily available flat, apartment or house instead if you can’t take out a mortgage or loan.
Some sage advice would be to approach a property specialist or a Certified Practicing Valuer (CPV) who can inform you about different properties and their potential to be valuable assets.
Choosing an existing house or apartment is a safer option. Investing in under-construction, or even pre-construction housing plans come with unquestionable risks. Essentially, you’re only buying a promise of a home, as there is no physical real estate that you are investing in.
Summary
It’ll be a great idea to consider all your options before buying or renting a home. The first property you see and the first person who pitches an impressive property development plan to you isn’t always the best option.
Flats and free-standing homes ready to move into are generally safer investment choices. You’ll be investing in an actual home that you’ll put to your name almost instantly (after application, background checks and approval).
Flats that are ready to move into and those under construction have positives and negatives. If you’re an investor or future homeowner who is cautious and want to avoid risks at all costs, then choosing an already-built property will be your best option.
An independent valuer can prepare a property report for you and compile market research on similar properties. It will enable you to make a wiser choice backed by expert opinion and data.
Get in touch with us for more information on tangible and under-construction property.
