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Building a new home in Cairns
With the Cairns northern corridor rapidly decreasing in terms of land availability and new parcels opening south of the city, new home sales continue to be in demand, and many owner-occupiers and southern investors buying directly off the plan. For many, particularly younger first home buyers, the new home market is appealing in that a small deposit is payable to the developer for initial construction costs, with the balance payable upon completion.
With affordability being at such a low point post Covid, apartments are becoming very popular in Cairns and Australia wide. In the instance of buying an apartment off the plan, the completion time is generally longer than that of a new house. The developer will need to sell off as many apartments as possible prior to applying for lender finance to commence the build. This is usually completed in stages, with apartments being released once each stage, or group of apartments has been finalised. With that in mind, it could take a few years for your new apartment to be completed. A small benefit there is that, hopefully, there may be a capital gain potential, however this is never a guarantee.
So, while an off the plan new home or apartment purchase sounds like an amazing deal on paper, particularly if well marketed by the developer, it may not be the best option for you at the time. Before making that decision, take the time to speak with your local Cairns home loan specialist to discuss your best options and to avoid many of the industry pitfalls.
New home builder FAQs
Time is on your side
Buying off the plan? Although you’ll have to wait longer before taking possession of your home, the extra time will give you the opportunity to save more prior to settlement. This means you’ll be able to reduce your borrowings which, over a fixed time such as 25-30 years can lead to considerable savings.
Less hassles
Although a custom designed new home will accommodate all your wishes, it will undoubtedly be much more expensive and time consuming than an off the plan home. The benefit of an off the plan home is that it’ just that, an out of the box design that is ready to go.
Of course, you’ll have some say in basic customisations such as fixtures eg kitchen, tiles, carpet etc and you’ll even be able to make minor structural changes such as extensions if it fits into the original plan. If making changes to your building plan that is outside of the current one, ensure all changes are documented in writing and outline all additional expenses.
First-home-buyer advantage
Incentives are available for first home buyers in Queensland, with the Qld Government currently offering the Qld First Home Owner’s Grant for $15,000 towards building a new apartment, townhouse or house. Obviously, conditions apply so always check your eligibility as government grants and funding can change at short notice.
You may also be eligible for a stamp duty concession on your new home. We recommend you research that possibility at www.stampdutycalculator.com.au
Incentives for Investors
While investor incentives may be very appealing at first glance, it’s worth doing your homework to ensure all claims by the developer are realistic and achievable. High yield rental guarantees are the most likely incentive to be offered in the first instance, with the developer agreeing to cover any shortfall in the agreed rental price for an initial period. On occasion, the investor discovers that the rental market falls well short of the claimed returns once the yield guarantee expires.
It’s also wise to ensure that you have the option to appoint your own property manager or simply manage the property yourself as soon as possession is handed over.
Be cautions of a boom
Rising property prices often cause a flurry of buying activity, however it’s not always recommended when buying off the plan, particularly when buying an apartment in a newly developing complex that may take much longer to build than a house.
Property prices in Cairns and Far North Queensland boomed in the early 2022 and reached record highs. Putting down a deposit at the very peak of the market may not be ideal, as stagnant or falling prices may impact your expectations of ROI.
Research the developer
The building industry is booming once again. Be sure to research your local builder and find out if they are in a position to service your agreement. What are their previous building projects in Cairns? Are they maintaining supply and demand in materials, given the current resources and transport issues throughout the world? Who do they use as sub-contractors and do they have a good history of completing projects in a timely manner?
Top Tips
- Speak to your Cairns accountant or financial advisor about your investment options before and during your purchasing journey.
- Ensure your contract includes all possible details specific to your build. Leave no stone unturned or room for misinterpretation.
- As part of the contract inclusions, ensure deposit refunds are addressed should the build not be finalised within the contracted date.
- Establish the scope of freedom you have in customising your fixtures and any small changes to design elements.
- Conduct site inspections throughout the build. This will need to be discussed with your property developer.
- Speak with your mortgage broker in Cairns about your best investment or home loan choices.
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