(It’s that time again, time when I share a guest post to help offer some perspectives on the world of money other than my own. Here, we’re getting a view of the real estate market from the fine country of Australia, where it seems like the real estate market is in much better shape than here in the United States. While we Yankees have more homes than we can get rid of, it seems like young Australians might need to build more houses to get a home of their own. For more advice on new-build homes, read on:)
The last five years have been tough. The world plunged into a deep recession which it is still struggling to emerge from, the housing market crashed, and buying your own home suddenly became unachievable for millions. A decade of living off credit that many could never pay back ultimately caused the markets to implode, and borrowing became a dirty word. The world wised-up to a culture of spending on credit and came down hard on borrowers. This was necessary, but it had the unfortunate consequence of making it impossible for a generation of first-time buyers to obtain a mortgage and step onto the property ladder. The deposits for mortgages have been simply too high for many young would-be homeowners, forcing them to stay at home with mum and dad or continue to rent. And that’s where new-build homes might offer a way onto the property ladder, largely by making it possible to obtain a loan of a high percentage of the purchase price.
If you were one of the millions across the globe who tried and failed to get a mortgage five years ago, when the beginning of the recession led to many lenders withdrawing mortgage packages and insisting on high deposits, it may be that you have spent the past half a decade saving and therefore now have a sizeable deposit. If so, good for you. You are now in a great position to buy a house without facing problems obtaining a mortgage or having to find sizeable monthly repayments. However, if you have been unable to save or are only just thinking of jumping onto the property ladder, a new-build home may be the answer. Many developers arrange mortgage options for an entire estate through a single building society, enabling them to offer loans of a high percentage of the property price, meaning the buyer doesn’t have to fork out so much for a deposit – a huge help considering typical deposits now cost half the average income.
Not only might loans be easier to obtain with a new-build but other costs, such as repairs and redecoration, shouldn’t be necessary for a number of years. Most new builds also come with a warranty and protection scheme so you’re covered should anything go wrong in the first few years of the building’s life. With many developers struggling to sell, they have started to offer tempting financial incentives, such as covering a certain percentage of the purchase price, to be paid back when you sell or over 10 years, or even paying the stamp duty for you.
However, it is important to consider the financial drawbacks of new-builds. Thanks to lenders over-valuing new builds before the recession, they are now wary about the percentage of a new build’s value borrowed and often limit the loan-to-value they offer directly to buyers. You may also face construction delays playing havoc with your mortgage completion date – if you don’t have a specific new-build mortgage you could see that attractive mortgage deal slip through your fingers, leaving you back at square one.
If you’re savvy, shop around for the right mortgage and enlist the services of a solicitor experienced in dealing with new-builds, such properties can offer a great way to be able to afford to get onto the property ladder. That way the money you fork out each month on your property isn’t lining the pockets of your landlord but is a true investment.
Emily Buckley is a journalist and copywriter with a keen interest in property and has written a number of articles for Cordell Projects, the leading authority on project activity and building cost information in Australia.
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