How to protect yourself when you’re buying new

We’re currently arranging a lot of mortgages for clients purchasing in new developments.

Investors like new builds because of changes to tax rules. First-time buyers like them because they can purchase at a fixed price and avoid competing at auctions. First-timers can also unlock a bigger HomeStart Grant.

However, there are some traps to look out for.

Trap 1: Looooong delays.

Thanks to Covid lockdowns, sluggish supply chains and an overheating construction market, many developments are taking much longer to complete. We know of people who’ve faced stress and extra expense because of problems lining up their finance with a completion date that’s been pushed out.

There’s also the pain of losing a property because of a sunset clause in the contract.

Trap 2: Not getting what you paid for.

It’s not unusual for the fittings, appliances and other features in the show home and brochures to change during the construction process. Sometimes this is unavoidable due to supply issues. Sometimes it’s no big deal. You may even get an upgrade.

But it is a reminder that you may not get what you thought you were paying for when you signed the contract for your brand-new home.

Trap 3. Developers with no track record.

Buying new usually means buying from a property developer or spec builder. How confident can you be that they will deliver what they promised – or even complete the build? There’s an element of risk you won’t get with an existing home.

The solution is research – and a good solicitor.

It’s worth finding out as much as you can about the developer or construction company. Do they have a good reputation? Have they been around for long? Does it look like they have a long-term commitment to the New Zealand market?

Above all else, do not skimp on legal advice. Make sure your solicitor goes through the contract and explains any risks related to the above. Listen to their advice and don’t hesitate to push back if the contract is one-sided in favour of the developer.

Allow plenty of time. Don’t be naïve and don’t get too emotional. You may be desperate to buy the new home of your dreams, but you only get one chance to sign a contract. Make sure it’s the right one.