Two of the most frequently asked questions at Investors Edge Real Estate are “Should I invest in an established home?” and “When is the best time to build a new investment property?”
In my five years of actively working in Perth real estate, I can honestly say that now is the best time I have ever seen to build an investment property in Perth. At this point, a confluence of market factors is providing unprecedented opportunity for those who have the resources to build a new home, either as a residence or as an investment property.
Established Properties are in Short Supply
Currently, there are only 8,500 established properties on the market in the Perth area. This is the lowest level in five years. Low supply always means high demand and strong pressure on prices.
Titled Land is Becoming Harder to Find
The waiting time for titles in most quality land estates in the Perth area is between two and six months. At Investors Edge, our network of builders and developers is second to none, and we can find you titled land in a quality estate, so you can build your investment property with minimal waiting.
Building Times are Still Manageable, but Won’t be for Long
Right now, it takes approximately 6 to 8 months to have a villa built for you, and up to 10 months to build turn key house. This includes time for building approval. However, all of that is about to change. The most anticipated labour shortage in the history of Australia should begin at the end of this year or the start of next year.
This means that many builders will not only have too few people working for them, but many who work for them will be under qualified and learning on the job. The only possible outcome here is for longer completion times of building when buying a new home. We recommend “getting in” before everyone else does; it could save you a lot of time and make you a lot of money.
Interest Rates are the Lowest in History
The current RBA cash interest rate of 3% is the lowest in its history. Housing loans are being written for as low as 4.99% interest. When any market factor such as interest rates is at an all-time low, it is only a matter of time before it goes back up.
The Economy is Robust, but the Costs of Labour and Materials are Still Keeping Housing Prices Low
The market for Free Sale Appraisal is perfect right now. Employment and wages are up, but home prices are the only economic indicator that hasn’t followed the rest of the market in recovery. That means that prices are still relatively low, while people have enough money to buy an investment property.
It is inevitable that housing prices will recover as well as the rest of the economy has, resulting in higher prices. In addition, the impending labour shortage will also play its role in raising the price for building a new home. We strongly encourage those who plan to build a new home to get the wheels in motion now and lock in a fixed price before the market rises.
Renters Want More for Their Money
A new house attracts a better quality tenant. In addition, tenants treat new houses better than they treat established houses, because they take more pride in new houses. Tenants often treat a new house like they would treat their own house. This means that your house will be better-preserved when you eventually decide to sell it.
Less Deterioration, More Depreciation, and Higher Resale Value
A new home will deteriorate less than an established home, and will have a higher resale value at the end of 20 to 30 years. In addition, you can write off more depreciation on a new home than you can on an established property. This provides obvious tax benefits.
At this point in time, we heartily recommend that anyone who has the resources to build a new investment property in the Perth market take advantage of those resources while the market is still favourable.
At Investors Edge Real Estate, we have access to what we feel are the best builders and the best new house and land packages in the Perth area. Prices start at $327,000, which will get you a 3 x 2 on cottage blocks, while $430,000 to $479,000 can purchase a larger, 4 x 2 house. We currently have packages available in Balga, Mindarie, Aveley, Byford, Champion Lakes, Harrisdale, Baldivis, Wellard, and Alkimos.
Call us today at 1300 472 427 or 08 9472 1606; let’s talk about your future.