Is The New Build Premium Worth It?

Brett Alegre-Wood
September 24, 2020

What is New Build Premium?

A new build premium is what you pay the builder when you are buying a new property. These new build properties are more efficient and cheaper to maintain. When the market is booming premiums go up so be careful. I would still advise if you have the money to invest you have to do your due diligence and invest in areas with the best fundamentals and you can never go wrong.

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I've seen you focus on new build and off-plan is a premium you pay from developers still worth it in this market?

Great is the new build premium worth it now the interesting thing with the new build premium is it changes over time. What we mean by so if you don't understand what the renewable premium is it's like you go into buying a new car, there's a new car premium than a second hand when you drive a flood drops in price.

It doesn't quite work like that with property a lot of people think yeah it does that's exactly when you know when you walk out at drops in price it doesn't quite. What happens is generally it takes about two years for a new site to bed down with the pricing because some people have bought you know Off-plan and bought this price.

And some people bought right at the last you know then three months before and bought at this price. And then somebody got the last one and got up at that price so there's kind of that price differential. So it evens it out you know and works out where the market's at. 

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And you know if the market's going up then yes if the market's going down so what you tend to find in times like this the new build premium actually compresses. And so what actually happens is you're getting stuff that is you know it's probably it's more expensive but I can tell you you don't have the maintenance you don't have the issues for I reckon around about eight years is normal.

If you buy off a quality developer you probably get four or five years off you know an average developer and if it's a crappy developer then you know you're probably six months in 12 months in. Don't buy crappy developers you know I mean that's that's the same for anything.

You can generally expect the premium what happens when the market is booming then the premium increases and so actually it's when the market's booming we're going to be really careful now I mean you've still got to be careful now but not as much.

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Hopefully that helps Dean but again have a chat to the team because right now we're finding the newborn premium is not huge you know it's it's not you know second-hand market here new build market here and you're talking probably 5% there's always going to be 5%ish in it but it can get up to I've seen it as high as 30 but you wouldn't buy that you know.

What happens is people go along to seminars and they get sold this sort of crap and they get sold on a dream of you know discount you know and all this rubbish and garbage and the problem is if they don't do due diligence, they don't check things out then they end up buying something that's overpriced because oftentimes what will happen is they'll say well look you're getting this 30 and then you know it's 30 premium but we're giving you a 20 discount and you're still paying 10 over the odds you know. 

Hopefully that sort of explains so is it worth paying the market look I love new build, I love off plan because that's the strategy I choose because I don't have to worry about maintenance, I don't have to do anything with the property. I'm busy doing this work , I'm busy with four kids and a family, I'm busy doing the stuff that I love so I don't have the time to go in and renovate and to do all that sort of stuff.

Now some of my properties now I was just looking at one you know my first property I bought in 2003 in the UK you know so you know so we're talking 18 years I've had that property. 18 years next November sorry 18 years November so you know so so but that that property I mean i've repainted it and I've done a few things to it but actually it's still a good solid property you know but now it's well and truly secondhand property you know so yeah it all settles down but yeah you don't want to overpay but that's a function of your due diligence okay so hopefully that helps Dean.

Video Transcription

I've seen you focus on new build and off-plan is a premium you pay from developers still worth it in this market? Great is the new build premium worth it now the interesting thing with the new build premium is it changes over time. What we mean by so if you don't understand what the renewable premium is it's like you go into buying a new car, there's a new car premium than a second hand when you drive a flood drops in price. It doesn't quite work like that with property a lot of people think yeah it does that's exactly when you know when you walk out at drops in price it doesn't quite. What happens is generally it takes about two years for a new site to bed down with the pricing because some people have bought you know Off-plan and bought this price. And some people bought right at the last you know then three months before and bought at this price. And then somebody got the last one and got up at that price so there's kind of that price differential. So it evens it out you know and works out where the market's at. And you know if the market's going up then yes if the market's going down so what you tend to find in times like this the new build premium actually compresses. And so what actually happens is you're getting stuff that is you know it's probably it's more expensive but I can tell you you don't have the maintenance you don't have the issues for I reckon around about eight years is normal. If you buy off a quality developer you probably get four or five years off you know an average developer and if it's a crappy developer then you know you're probably six months in 12 months in. Don't buy crappy developers you know I mean that's that's the same for anything. You can generally expect the premium what happens when the market is booming then the premium increases and so actually it's when the market's booming we're going to be really careful now I mean you've still got to be careful now but not as much.Hopefully that helps Dean but again have a chat to the team because right now we're finding the newborn premium is not huge you know it's it's not you know second-hand market here new build market here and you're talking probably 5% there's always going to be 5%ish in it but it can get up to I've seen it as high as 30 but you wouldn't buy that you know. What happens is people go along to seminars and they get sold this sort of crap and they get sold on a dream of you know discount you know and all this rubbish and garbage and the problem is if they don't do due diligence, they don't check things out then they end up buying something that's overpriced because oftentimes what will happen is they'll say well look you're getting this 30 and then you know it's 30 premium but we're giving you a 20 discount and you're still paying 10 over the odds you know. Hopefully that sort of explains so is it worth paying the market look I love new build, I love off plan because that's the strategy I choose because I don't have to worry about maintenance, I don't have to do anything with the property. I'm busy doing this work , I'm busy with four kids and a family, I'm busy doing the stuff that I love so I don't have the time to go in and renovate and to do all that sort of stuff. Now some of my properties now I was just looking at one you know my first property I bought in 2003 in the UK you know so you know so we're talking 18 years I've had that property. 18 years next November sorry 18 years November so you know so so but that that property I mean i've repainted it and I've done a few things to it but actually it's still a good solid property you know but now it's well and truly secondhand property you know so yeah it all settles down but yeah you don't want to overpay but that's a function of your due diligence okay so hopefully that helps Dean.


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