Investing in property to build your wealth, is still popular in New Zealand, but there appears to be a shift from purchasing existing properties and instead going with a new build option. Recent regulations have aided this move, but let’s explore other reasons behind this shift.
Smaller Deposit Required
Investors don’t always have a large cash deposit, instead relying on equity, so an option where a lower deposit is needed is preferable. At the moment, when investing in a new build you only require 20% deposit as opposed to 40% to purchase an existing property.
New builds tend to require less maintenance and less repairs, which means less ongoing costs, which is great for cash flow. The risk for investors of having to deal with a large one-off repair is much lower with a new build. Plus, new builds are built to current Building Code so don’t need extra work to bring them in line with Healthy Home Standards (like some existing properties) and typically come with warranties and guarantees.
More Tax Benefits
When purchasing a property, investors are allowed to claim deprecation on chattels, fixtures and fittings. Therefore, for a new build, these will be at their highest value at time of purchase and because typically everything is new and you often purchase new furniture etc for the home, this can equate to thousands of dollars in the first few years.
Helping with the Supply Shortage
Many parts of New Zealand are suffering from a large housing shortage and there’s a push to build more warm, dry, healthy homes. So as an investor, if you purchase a new build, you are helping with this supply shortage.
Purchasing a new build as opposed to an existing property has a number of benefits, which we encourage you to think about before making a decision.
If you’re currently considering purchasing an investment property but have a few questions, please contact one of our financial advisers, we can help you on this journey.
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