Why are new builds cheaper to own and sell?

When you’re looking to buy a home one of the, if not the biggest, consideration is price. However, whether or not a home makes good financial sense goes far beyond how much it will cost you up front.  

As part of your financial planning, you should be thinking about the home’s maintenance and upkeep costs required, along with costs you might incur when it comes to selling the property. 

Here, we’ll look at why buying a new build is a savvy option when it comes to minimising the ongoing costs of home ownership, and how these properties can help you maximise your capital gain when you sell.

1.  New builds are energy efficient

New Zealand homes have a well-deserved reputation for being cold in winter. This is mainly down to older construction materials not being effective insulators, and historic building codes lacking requirements for properties to remain at healthy and comfortable temperatures for the occupants. New builds, by contrast, are built to the latest standards and with the best possible materials, meaning your home will be well insulated all year round. This can make a huge difference to how much money you have to spend on heating bills, especially over the colder months of the year.

2.  New builds require less maintenance 

Another consequence of the use of more technologically advanced materials and more rigorous building standards, is new builds tend to require significantly less maintenance than older properties.

What’s more, given these homes will have had zero wear and tear when you move in, you won’t have to worry about patching up smaller aesthetic nicks and scrapes left by previous owners.

3.  New builds are exempt from the interest deductibility law

To discourage investment in residential properties, the Government recently introduced a law meaning it will no longer be possible to claim a tax deduction on interest incurred on residential rental properties.. This law impacts residential properties bought on or after March 27th, 2021. 

However, because the Government didn’t want to discourage the supply of new housing, new build homes are exempt from this interest deductibility law. This means that if you’re looking to start or expand a pre-existing investment property portfolio, new builds are starting to look like a pretty good option.

4.  New builds are exempt from the bright line test extension 

The bright line test has been around for a while now, and is designed to tax investors who are intent on speculative buying and selling of property. 

Until recently, the bright line test meant that tax was required to be paid on gains from the sale of a residential property bought and sold within the same five year period. However, in March 2021, the Government announced that this period would be extended to ten years, along with other changes. This may impact you when you come to sell off a property purchased after 27 March 2021 if you’re selling within a ten year period.

However, most new builds are exempt from this extension, meaning they are only subject to the bright-line test for the first five years after purchase. The obvious benefit being no bright-line obligation after five years of owning a new build.

To find out more about the economic and practical benefits of buying a new build home, get in touch with the experienced team at Golstruct Homes today.