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Buying into a new residential development vs an established home

Only 35% of SA’s population live in formal housing structures; the remaining 65% live in informal dwellings and structures. For the vast majority of South Africans, their living experience during the 2020/2021 lockdown, has brought into focus the need for better housing and home ownership in SA.

It is widely understood that the future growth of SA’s housing market can only come from new residential developments either in the form of conversion of commercial property into residential dwellings or residential developments built from scratch.

There are pros and cons of buying in a new development vs. buying an established house from an existing owner. The decision around which option is better is largely based on the buyer’s personal choice and preference.

However, there are some practical considerations a buyer can weigh up to make an informed decision. For a first-time home buyer, new developments are a great way to start your home ownership journey. Buying in a new development gives you the peace of mind knowing that every fixture, fitting and structure of the home is brand new with its full warranty in place.

Also, it is more cost effective to acquire the property, because of the inclusive cost. Plus, the property is likely to be in a developing area with a strong network of amenities, where its future valuation is probably more predictable because of the abundance of comparable sales in the area.

For active property investors and experienced homeowners, with the ability to renovate a property for the purpose of reselling it at a better market value, then the option of buying an established home would be more appealing, as they have the opportunity and experience to improve both the utility and economic value of the home.

Below are a couple of insightful pros and cons of buying established homes vs. buying in a new development.

Pros of established homes 

  • Buying an established home means you get the benefit of an already established neighbourhood with roads and amenities in place, such as public transport, schools, shopping centres and lifestyle areas. 
  • Established homes tend to have bigger area size per square metre than that of new developments, as land space and densification become a factor. 
  • If the property is bought at a reasonable price, it could be cost effective to renovate and this allows you to give it a new, fresh and modern feel, while benefiting from the upside of high market value.

Cons of established homes 

  • Houses in the neighbourhood that are not well maintained will negatively affect the value of your place indirectly.
  • Older properties are sold "voetstoots" (without a warranty), therefore you are exposed to the cost of unknown structural issues.
  • The initial acquisition costs are high as the transfer cost, duty and attorney registration costs are not included in the purchase price and must be paid for by the buyer.

Pros of a new property development

  • The valuation of the home is very predictable given that all the properties in the development would be of similar value. 
  • You are generally able to choose the design, layout, finishes and everything else to suit your needs, preferences and in line with the current trends.
  • The initial acquisition costs are low as the transfer cost, duty and attorney registration costs are included in the purchase price.

Cons of a new development

  • The price of property is more set with limited scope to negotiate it downwards and minimal opportunity to change material aspects of the design and structure. 
  • New developments are usually in areas that are under-developed, from a public infrastructure standpoint, so in the short term, buyers must contend with the instability of ongoing construction until the area is built up, which could take a couple of years.
  • There may be uncertainty about the quality of workmanship and material to be used, therefore, much of the house "settling down" can only happen with time.

Housing is a national imperative in SA’s transformation and development agenda. As a developing nation with a young population, the bias for new developments is naturally going to be the trend in the property industry.

Thankfully, the downside of buying into new developments is temporary because a few years later it will be viewed as an established house. Either way, whatever final decision you make, be sure to do your homework to avoid long-term disappointment down the line.