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Marcelo U.
Marcelo U.
Kensington, NSW

I’m looking at buying a property for long term investment and capital gain. What are the factors I should be considering and would a new unit off the plan be a better option or an older house with land?

4 years ago


Marcelo, Thanks for your question, however without the benefit of a Crystal Ball, it is one that has no accurate answer. If you consider the facts (particularly in the unit space of Sydney and Melbourne) there are plenty of reports available that discuss the high level of new units that will 'come to market' over the next eighteen months / two years. According to many experts this oversupply situation has a real potential to put downward pressure on the unit market over this period.
For those who are considering this type of investment with just the 'bare bones' 5% deposit and no ability to raise additional cash, I am currently advising that they stay out of this market (particularly now that existing properties in NSW have the same stamp duty concession for First Home Buyers).
For other borrowers a reduction in value of the future unit, may see them enter into an area of paying Lenders Mortgage Insurance which may not have been budgeted for. In this area it is important to look at borrowing capacities to see if this additional cost could e absorbed.
This whole area of financing is commonly referred to as 'Settlement Risk' in the marketplace.

So is buying property for a long term investment a bad idea ?. I do not believe so.

At the end of the day, there are only three types of investment (Cash, Shares and Property). Any other type of investment that you may view is either a hybrid of these or has these elements as their underlying backing. Don't get me wrong, you still have plenty of variations with International versus Domestic and Commercial versus Residential options etc.

Property has demonstrated itself to be an excellent option when historically viewed over the long term. In considering if this is right for you, you should discuss with your Accountant as to the taxation implications and then a Financial Planner to ensure it is the right investment for both your short and long term needs. If this is the case, you then should seek out the services of an experienced Mortgage Broker to help you work through the myriad of lending options available and find a product that suits your needs.

Hope this has been helpful.
Best Regards
Ken Olds
Mortgage Broker
Customers First Mortgages & Insurance.
1300 ASK KEN

Hi Marcelo,
Buying a property is a sound investment for the long term. Which type of property and where you buy now will have a great effect on your results.
As Ken said, without a crystal ball nobody knows for sure, however it has been historically true that properties on land have grown better than apartments and flats.
The decision for you to make today is what fits your 5 and 10 year cash flow and capital needs best. I would recommend sitting with a tax specialist who is also an advisor to map this out.
People who lose in property are those who are forced to sell so I would look to purchase a house, unit or townhouse that leaves you with a buffer of monthly cash spare and some spare capital for life changes that will come along.
Depending on your income and your deposit, new may be better from a tax perspective whereas existing will usually be better from a capital growth point of view.
Best of luck

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