Question: We're starting a family and looking to buy our first home. We like the idea of buying a newly-built home, but we've been kind of shocked by the prices. We thought a new home a little ways outside the core would be cheaper, but they don't look cheap to us! What's up? Is buying an old fixer-upper a better choice?
Answer: A similar discussion of new versus resale has become a fiercely debated topic these days in large urban centres throughout Canada, with a focus on the condominium market. The same arguments and concerns apply to the single-dwelling housing segment as well.
On my side of fence are those who much prefer a new home that can provide a turnkey experience – in theory. There is no need to invest an additional, and often unknown, amount of time and money to renovate and improve a home.
New home construction often happens in suburban areas that are underdeveloped, therefore can offer more in terms of living space and property size. Urban infill projects are the exception, as they are utilizing prime city space and are limited in size.
The ability to choose custom finishings in a new home appeals to a lot of people. Instead of having to inherit someone else's choice of flooring, cabinetry and countertops, you have the opportunity to select your own. And who can forget that everything is new, and never been used – including the bathrooms!
Finally, new home purchases come with a warranty. Coverage by province, but typically protect you against delayed closings, defects in construction, basement foundation and much more. In Ontario, Tarion provides all new homes with coverage.
On the other hand, those who prefer to buy a resale home will undoubtedly bring up the same point as you have – pricing! There was once a time where buying pre-construction from spec could save you a whole heap of money – those days are largely gone. Most builders price condos and homes at anticipated future market value. This means a potential buyer will be paying what the builder thinks the home will be worth when it is completed and occupied.
An additional cost needs to be taken into consideration when contemplating a new home. HST/GST is applied to the price of a new home and can significantly increase your overall costs. This does not apply to resale homes, as they are exempt from the tax.
Existing homes tend to be in established neighbourhoods, which can give an accurate sense of what the community will be like to live in. From existing infrastructure, schools and businesses serving the area, you can paint an accurate picture with some diligence.
As well, an existing community will have a record of sales performance that can be tracked through historical data. This allows you to better determine value when deciding location and which home to purchase.
The old saying, "they don't make them like they used to" can cut both ways: Many older homes have been built to last with sturdy materials and fine workmanship, but newer homes can take advantage of advances in materials technology and construction standards.
Buying an older home that requires some TLC can allow you to unlock some of the hidden potential of that home, whether it be for use and functionality or value down the road.
Whatever decision you make, both options have their pros and cons. Once you've determined which considerations are most important to you, your choice starts become clearer.
Ricky Chadha is a broker with Royal LePage Estate Realty in Toronto, and specializes in applying social media and other digital tools to the business of real estate. You can find Ricky on Twitter @your416 or at his website RickyChadha.com.
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