When buying any commodity, new is often better than used. In the housing market, though, your best opportunity can come from an old home or, as in Ottawa, where the inventory of new homes is overstocked, you may be able to purchase a new home for the same price buyers paid years ago. Here are some advantages and risks of both options.
Advantages of Buying Old Properties
- you can physically walk through and inspect the home
- similar listings have sold or are currently available to use for comparative market analysis when establishing price
- antique homes appeal to a large group buyers, renters and investors
- builders and developers can try to maximize land value by subdividing
- investors can renovate the property to increase profitability
- do-it-yourself enthusiasts can invest sweat equity to reduce repair or upgrade costs
Advantages of Buying New Properties
- they have all the latest technology and comply with the Ontario Building Code
- you can choose custom finishings rather than inheriting someone else's choice
- new homes come with a warranty
- new properties are generally lower maintenance
- low energy ratings make them cheaper, reducing ongoing operating costs
- financing may be easier since builders often arrange mortgages as part of the sale
- for investors, tax depreciation benefits could reduce the holding costs of the property
Risks and Concerns of Buying Old Properties
- existing properties can have structural or mechanical issues so check the age of major components and employ a building inspector to identify hidden concerns
- if you need repairs or upgrades, a building inspection will help during negotiations
- easements or caveats on the title may affect your plans for the property
- check ownership on title and vendor warranties to ensure a smooth closing
- if renovating or sub-dividing, make sure your plans comply with zoning regulations
- competing, emotional buyers can drive up property prices during negotiations or auctions
Risks and Concerns of Buying New Properties
- risk of construction delays and possible cost overruns that increase the price
- you pay HST/GST on a new home, which adds to your costs
- in a new subdivision, little, if any, infrastructure exists
- similar properties, in the same area, may be slow to grow in value
- apartments in a recently zoned area could be in over-supply and tough to rent out
- beware of growth corridors because you could have a long wait for profits
- choose developers carefully and run background checks on associated parties