Key takeaway: New builds can suit some investors, but growth must come first, says Scott Aggett, buyers agent and Founder of Green Shoots Property. Since the negative gearing changes he buys ready-built new houses, priced against established homes, in owner-occupier areas with limited supply. His mortgage brokers say buyers of established property face a 15 to 20% cut in borrowing capacity.
In this episode Mike Mortlock is joined by Scott Aggett, Australia’s Leading Property Negotiator and Founder of Green Shoots Property. Mike and Scott discuss the changing landscape for property investors following the government’s changes to negative gearing and why Scott, who has traditionally been cautious about new builds, is now considering them as a viable strategy for some investors.
They unpack the risks and opportunities of buying new, including location, supply, owner-occupier demand, rental returns, construction quality and the importance of negotiating the right price.
Scott also shares how he is approaching the new-build market with his clients, why growth remains the priority, and where the tax and cash flow benefits fit into the overall investment strategy.
Scott has traditionally avoided new builds, mainly because of off-the-plan units, but when the government moved the goalposts he looked for a viable sweet spot. He now buys ready-built houses for some clients. He says the tax treatment and cash flow are an added bonus that never drives the decision. Growth comes first: affordable markets, high owner-occupier ownership, limited future supply and demographics that can support rising rents and values.
Scott lists buying in oversaturated investor locations or big off-the-plan strata schemes, using developers with poor track records, taking on construction loans with insolvency and blowout risks, and paying for the glossy brochure. He says off-the-plan prices can include a $30,000 to $50,000 commission, and a fixed price is often a marketing ploy. Check comparable sales as a valuer would and get a building and pest report before signing.
In Scott’s experience in Sunbury, Melbourne, they can. He budgets conservatively, estimating around $600 a week for new four-bedroom houses, and typically achieves about $630. He says the typical four-bedroom yield in Sunbury was about 3.45%, while his new four-bedroom purchases were yielding about 4.4%. He credits choosing the right estates and configuration, negotiating hard on price and using a trusted property manager.
Scott says his clients told him they can’t afford to stack their losses against a gain when they sell; they need the tax refund year to year to hold property. His mortgage brokers say buyers of established property face a 15 to 20% reduction in borrowing capacity with most major lenders. With depreciation on a new $800,000 house, he says the year-one out-of-pocket difference can be around $18,000 to $19,000.
This is general information from the podcast, not financial advice.
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