First Home Buyer Or Investor? Considering A New Build?

A hand wearing builder gloves holding a house on the left, and hands holding a house and some keys on the right.

06 Jun First Home Buyer Or Investor? Considering A New Build?

As a first home buyer or property investor, choosing between buying a new build and buying an existing property can be a difficult decision. While new build homes promise lower maintenance and improved comfort with benefits like sustainable building materials, better insulation, and eco-friendly heating and cooling features, existing homes often have character and charm, may be well-located in established neighbourhoods, or come with larger sections or living spaces. To help you decide between buying new and buying existing, here’s an outline of the benefits of each.

Buying new vs. buying existing for first home buyers

As a first home buyer, it can be challenging getting onto the property ladder. Saving a big enough deposit, tighter lending conditions, and rising interest rates have pushed housing affordability out of reach of many. Buying a new build could help first home buyers overcome these hurdles with a number of other cost-saving benefits:

  • A bigger First Home Grant: Provided you meet the requirements for a Kāinga Ora First Home Grant, you could get up to $10,000 in grants for a newly built home compared to $5,000 for an existing property. Buying with a spouse or partner could see that figure double, providing a significant kick-start to your deposit.
  • A smaller deposit: Most lenders require first home buyers to have at least 20% deposit when buying property, but in some cases, it’s possible to buy a first home with a smaller deposit. First Home Loans, underwritten by Kāinga Ora and issued by selected lenders, provide home loans NZ to first home buyers with as little as 5% deposit. Additionally, these types of home loans are not impacted by Loan to Value restrictions imposed by the Reserve Bank of New Zealand that limit the amount of low deposit lending banks can do.
  • Special rates and financing options for new builds: Some lenders offer discounted floating interest rates for first home buyers building new homes or buying turnkey properties. Others may offer extra-low mortgage rates to first home buyers buying new. As these rates can fluctuate and change at any time, it’s worthwhile working with a Mortgage Adviser – such as those at Max Mortgages – who has access to regular updates from lenders and knowledge of current offers.
  • Improved energy efficiency and comfort: Built to be more comfortable, new homes include energy-saving features like double glazing, superior weather proofing, newer fittings and fixtures that help cut down on heating and cooling costs.
  • Lower maintenance costs: Using new innovations and improved building materials, new build homes are built to higher standards which means they may last longer and require less maintenance.
  • Lower insurance premiums: In some instances, you may find that house insurance for a new build is more cost-effective than that of an existing home. That’s because new build homes tend to come with fewer risks which can make them cheaper to insure. However, it’s important to remember that insurance premiums are determined by a variety of factors, including the level of coverage, the replacement cost of your house, and your choice of insurance provider. When purchasing a house, it’s advisable to consult with an experienced Insurance Adviser, like those at Max Insurances, who can help navigate the complexities of insurance policies, ensuring your house is adequately protected and you’re not paying more than you need.

Many first home buyers like the idea of owning a home with character and charm, or they may be considering adding value to their first home through renovation. Choosing an existing home in these situations makes perfect sense, while other benefits include:

  • More space: Existing homes often have larger sections and bigger living spaces, while new build homes tend to be built to maximise space with a smaller footprint and less outdoor area.
  • Certainty and fixed cost: Whether you buy an existing home by tender, negotiation or at auction, on settlement day you know exactly how much it’s going to cost. And, because you don’t need to wait for the property to be built, there are no cost blow-outs due to increased construction prices or “sunset clauses” that could result in your contract being cancelled.
  • An established neighbourhood and mature garden: Depending on its age, existing homes are usually located in established neighbourhoods with well-developed infrastructure, transport, education, and retail facilities that offer convenience and reliability.
  • No waiting: Being able to move in as soon as the home becomes yours is a big advantage. There’s no waiting around for your home to be built and no construction delays that push back deadlines.

Buying new vs. buying existing for property investment

When it comes to property investment, new builds may be the preferred choice for some investors, with benefits like greater security, a lower deposit, and tax incentives that maximise return on investment:

  • Lower deposit: For property investors, deposit requirements may be as low as 20% for new build homes, while for existing homes the deposit requirement is usually 35% to 40%.
  • Favourable financing: Some banks offer favourable interest rates and loan terms for new build properties, while others may offer higher cashbacks and other incentives for investors investing in new builds.
  • Rental ready: Because new build homes are built to higher standards using improved technology, they are already compliant and meet the requirements of the Healthy Homes Act.
  • Tax incentives: Newly built homes are exempt from Government’s property interest limitation rules changed on 1 October 2021, that no longer allow investors to offset their interest as an expense against rental income, so property investors who buy newly built homes with mortgages will pay less tax than those who buy existing properties.

For some property investors, buying existing homes can be a better fit, allowing them to use renovation as a strategic move to boost home equity and grow a property portfolio, and to buy more land for greater capital growth:

  • Adding value: Renovating an existing home adds value to the property and increases the amount of rent that can be charged.
  • Using equity to buy more: Buying an existing home and renovating it to increase value can build up more equity to use to grow a property portfolio. While this process is possible with new builds, it can take a little longer to increase in value through capital growth.
  • Ready to move in: Assuming the home meets the Healthy Homes Act, an existing home allows property investors to rent it out immediately and start recouping a return on their investment.
  • More land may equate to greater value: As many new builds come with less land than an existing home, some property investors choose existing homes for faster capital growth with a bigger land value.

Buy new or existing: get the right financing for your needs

Whichever option you decide is right for you, whether buying a new or an existing property, getting financial advice that’s tailored to fit your situation and lifestyle is key to success. For advice around NZ home loans for first home buyers or property investors, contact a Mortgage Adviser at Max Mortgages.

Contact a Mortgage Adviser


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