The Question of the Month
Because when I wonder, it’s worth… asking!
Through this column of the monthly online magazine of Synergy Real Estate, answers will be provided to various questions related to properties and the real estate market in Cyprus.
Our Sales Manager, Panagiotis Tofas, answers in detail the question that was posed to him this month.
What are the advantages and disadvantages of purchasing a newly built property compared to one that is being resold, and similarly, what are the advantages and disadvantages of investing in a pre-owned property?
Indeed, there are advantages & disadvantages, both in buying a newly built property and investing in a pre-owned one, and I will elaborate on both of these categories further.
Advantages of purchasing a newly built property:
- New Construction: It is brand new and it has not undergone any wear and tear from previous owners. This means that the construction is modern, compliant with the latest specifications and standards, and most likely incorporates new technologies and installations.
- Minimal or No Maintenance Issues: Since the property is new, the chances of having maintenance problems are very small. New constructions usually come with warranties from the manufacturer, which cover any potential issues that may arise for a specific period of time.
- Energy Efficiency: New constructions usually adhere to high energy efficiency standards. This means that the newly built property can be better insulated, equipped with energy-efficient heating and cooling systems, as well as save energy, resulting in reduced expenses for heating and cooling the property.
- Adjusting to the Buyer’s Preferences: Usually, buyers are given the option to configure the layout, materials, and final details, tailoring the property to their personal preferences and needs.
Disadvantages of purchasing a newly built property:
- Higher Cost: Newly built properties typically come with a higher initial value compared to pre-owned properties in the same area.
- VAT Imposition: For the purchase of a new property, Value Added Tax (VAT) is always applied. The VAT rate is 19%, unless it is for home-ownership purposes, in which case it is 5%.
- Waiting for Completion: Buying a newly built property might require time for the construction to be completed. This means that the buyer will have to wait until the property is ready to move into and to make use of it.
- Property Title Waiting Period: Purchasing a newly built apartment is done with a sale agreement document that is registered with the land registry. The property title is usually issued after 2 to 3 years if the building has been constructed according to the relevant permits and under the condition that the contractor is consistent and has submitted all the required documents to the appropriate authorities.
Advantages of investing in a pre-owned property:
- Lower Initial Investment: Pre-owned properties are usually sold at lower prices compared to newer constructions. This means that you can make a purchase with a smaller capital.
- Immediate Income: A pre-owned property can provide an immediate income stream through renting. There is no need to wait for its construction to be completed – unless it requires renovation.
- Tax Exemption: Pre-owned properties do not have Value Added Tax (VAT), but they may have transfer fees.
Disadvantages of investing in a pre-owned property:
- A pre-owned property might require adjustments and repairs: Depending on its condition, it might need both time and money for maintenance, repairs, or renovations. This can increase the cost of investment and might require extra attention and planning. Additionally, there is an increased risk of hidden defects, and “hidden” issues might be discovered after the purchase, potentially necessitating costly repairs.
- Limited Technological Upgrades: A pre-owned property may not have the latest technological upgrades that are available in newer ones. This can affect its performance, efficiency, as well as its attractiveness, reducing interest for future renting or selling.
- Higher Maintenance Costs: Maintaining a pre-owned property may be more expensive compared to a new property. Older structures and installations might require more frequent maintenance.
- Decreased Appreciation in Value: A pre-owned property might not increase in value to the same extent as a new one. Older residences or commercial buildings might experience limited appreciation over time, as they exhibit normal wear and aging.
In conclusion, I will mention that, in general, there is no set rule for determining the best type of property to choose for purchase, as each individual has different needs and investment capital.
The market presents a variety of options as well as opportunities. Older properties in excellent condition, apartments at favorable prices, and opportunities that concern beautifully newly built properties at reasonable prices.
Before reaching a final decision, we should conduct a thorough examination of the options currently on the table, but also consider how best to leverage the capital that we have.
When making investment decisions, it is crucial to take into account our needs, resources, and objectives. Additionally, the advice of an expert, such as a real estate agent or a financial advisor, can prove invaluable in providing proper guidance and avoiding serious mistakes. These professionals can help us assess our options, estimate the value and condition of the property, as well as analyze the expected returns and risks of an investment, ultimately leading to a safe purchase.
* You can also send us your own questions for resolution at email@example.com