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Buying A New Build Home?

3 Apr 2024

Buying A New Build Home?

If you’re looking at buying a new build home, there are things to be aware of regarding the purchase process and the investment pros and cons of buying a new build home.

How to buy a new build home

There are three main ways of buying a new build home in New Zealand:

  1. Buying land to build on yourself – If you’re lucky enough to find land to buy in Wellington, or anywhere else in NZ, the process here involves purchasing the section and then managing your own new home build. You may find a vacant section, or you purchase a section with an existing property that you have moved or demolished. You then manage your own new home build with an architect, builder, etc. This is not for the faint-hearted as there are many legislative and logistical steps to manage.
  2. Buying a new build home off plan – This process involves buying from a developer who has already acquired land and has plans drawn up for a set of new homes to be built on it. You commit to buying one of the new-build homes before it has been built, based on the specs from the plans.
  3. Buying a new build home already built by a developer – This is possibly the easiest way to buy a new build home. You buy a new-build home that has already been built.

How long does a new build take?

There is no set answer to how long a new build home takes. But there are a few questions you can ask the developer. This will give you some idea of how long it may be before your new build home is complete:

  • If buying off plan, will the developer wait until all the homes have been purchased before they start building?
  • Are there any outstanding resource consent issues or building consent issues that the developer is waiting for resolution on?
  • Is there an existing property on the section that needs to be sold and moved before building can commence?
  • Will the new-build home be built on-site or off-site and then transported?
  • Are there any financial commitments or consequences tied to the new build timelines?
  • Purchasers should always have new-build contracts checked by a solicitor for completion dates, penalties if these are not met, finance approval timeframes and settlement dates.
  • Is there anything else the developer can tell you about the build timelines and process?

How much is it to build a new home?

If you’re purchasing land and building a home yourself, it may help to consider these as two separate financial commitments. The price of the section will depend on many factors beyond your control.

These include things like the market value of sections where you’re looking to buy, the condition and properties of the section (is it on a hill, near the beach, close to public transport, etc) and any building or resource consent issues.

Most of these factors are out of your control. But what you can control is how much you spend on building the new house. It’s best to talk to an architect and/or builder to set a realistic budget for building your new home.

You will need to factor in the cost of materials (which may have changed due to supply chain interruptions after the pandemic), the cost of labour, all the tradespeople involved in a new build, legal fees, inspection fees, and more.

When you buy a new build home from a developer, they will look after most of these details for you. So you have a pretty good idea upfront of what your new build home will cost. The only costs that you will need to research yourself are any legal and finance fees you will incur for borrowing and completing the purchase.

Throughout NZ, and particularly in Wellington, new builds tend to cost less than purchasing an existing house. One study found that new homes were cheaper than existing properties in Auckland, Wellington, Tauranga and Queenstown Lakes – sometimes by as much as $600,000. And in some suburbs, the difference between a new-build and an existing home was as much as $1.5 million.

How much deposit is needed for a new build?

The deposit you require when purchasing property is guided by Loan To Value (LVR) restrictions in NZ set by the Reserve Bank.

According to LVR restrictions, if you are an owner/occupier, you will need at least a 20% deposit if you are purchasing a new build or an existing property.

If you’re an investor, you can get away with a smaller deposit when purchasing a new build compared to an existing property. You’ll need a deposit of 35% when buying an existing home. On the other hand, most lenders will approve a smaller deposit of 20% for a new build.

Do you pay stamp duty on a new build?

When buying a new build home in New Zealand, you do not need to pay stamp duty. In fact, there is no stamp duty in NZ, regardless of the type of property you are buying.

Stamp duty is a type of tax that people pay when purchasing property in places like Australia or the UK.

Is buying a new build a good investment?

Most market studies will show you that buying a new build home is a good investment. Nationwide, new build homes tend to increase in value, as they have done for the past few years.

One source referenced found that nationwide the median value of new-build homes rose 19.77% in a 12-month period.

Another point to consider when looking at the benefits of buying a new build home is the fact that the new interest deductibility tax laws in NZ may affect how much a new build home costs you if you are a property investor. You may be facing higher tax bills on your investment properties because new build homes are exempt from the interest deductibility tax changes.

Do new builds increase in value? 

Part of the reason why new builds are a good investment is because of the very fact that they are new. An older home may not increase in value as significantly, if at all, even if it’s in a good area.

When you buy an existing home, you’re also buying any building issues it has and any repair work and maintenance needed. A new build home won’t have the same amount of maintenance or refurbishment needed that an existing property may have.

Being able to buy a home that doesn’t need any maintenance, repair work or renovations is a huge bonus. Many buyers are busy, with no time (or skill) to do DIY work. So a new-build home that is in perfect condition will almost always increase in value more than an older home in the same area.

If you are thinking about buying a new build home, get in touch with us at Lowe & Co. We are experts in the Wellington property market and give you knowledgeable guidance and up-to-date information about buying a new build home. 

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