The guideGetting prepared2 min read

New versus established

For a first home buyer this is mostly a tax question, and the answer differs by state. What each one costs, and what each one risks.

By Paddy Carroll · Founder, HomePlanner

Most writing on this subject is aimed at investors and turns on depreciation schedules. For a first home buyer the decision is dominated by something much simpler: in several states the government treats a new home and an established one completely differently, and the gap can be tens of thousands of dollars.

Start with the money the government moves

  • The First Home Owner Grant is new-homes-only. Every state and territory restricts it to newly built or substantially renovated homes. Buy established and, in most places, you are not eligible for it at all.
  • Stamp duty can differ sharply. Queensland charges first home buyers no transfer duty on a new build, at any price. Where you build, duty is often assessed on the land value alone rather than land plus house.
  • Price caps treat them differently. Several schemes run separate caps or streams for newly built homes.

The current figures, by state, with the dates they were checked, are in how the government can help. Check them there rather than trusting a number in a sales office.

Then the rest of it

New build

Nobody has lived in it.

Government support
FHOG available; duty concessions often far larger.
Condition
Everything new, under builder's warranty, low maintenance for years.
What you're paying for
Includes the developer's margin and marketing.
Negotiation
Limited. Developers hold price and offer inducements instead.
Location
Mostly where there is land — outer suburbs, or density projects.
Adding value
Hard. It is already finished to spec.

Established

Somebody has, and it shows.

Government support
No FHOG in most states; standard concessions only.
Condition
Wear, and the possibility of something expensive behind a wall.
What you're paying for
Set by what the market will bear on the day.
Negotiation
Real. Vendors have circumstances, and circumstances move price.
Location
Wherever people already live, including established inner suburbs.
Adding value
The main route to growth you control: renovate, improve, subdivide.

The risks that only apply to new

  1. 01

    You pay today and settle later

    Off the plan, your lender values the property near completion, not at signing. If the market softens in between, the valuation can land under your contract price and you cover the gap in cash. Same mechanism as a low valuation on any purchase, but the window is years rather than weeks.

  2. 02

    Sunset clauses

    A date by which the build must finish, after which either party may walk. Historically some developers used a rising market and a missed sunset date to cancel and resell. Several states have tightened this; ask your conveyancer exactly what the clause in your contract permits.

  3. 03

    Completion and quality risk

    Builders fail, projects stall, and defects in new apartment buildings have been a live issue in Australia for a decade. Builder's warranty helps and is not the same as the problem never happening.

  4. 04

    Initial softness

    A new property can dip in value in its first years, because the premium you paid included the developer's margin. If you may need to sell inside five years, weigh that carefully.

Do this in HomePlannerScenarios Run both against your own numbers over ten years, with the duty difference and the levies in, rather than comparing two asking prices.Free account required

Before you move on

  • You've checked what your state pays or waives for a new home specifically
  • You've compared on total cost over years, not on purchase price
  • For off the plan, you know what the sunset clause allows
  • You've discounted depreciation arguments if you're going to live there