Why do so many property investors choose new builds?

There’s more to the appeal of new-build investment properties than lower maintenance and builder warranties. Savvy investors are also benefiting from the less obvious financial advantages that come with buying new.

One of the biggest financial benefits is that eligible new build investment properties are often easier to finance than existing investment properties.

Under the current Reserve Bank of New Zealand (RBNZ) lending rules, eligible new builds are exempt from the investor loan to value ratio (LVR) restrictions. This means some banks will consider lending up to 90% on eligible new build investment properties, meaning you could buy with a 10% deposit, whereas existing investment properties often require a much larger deposit.

Because new build lending sits outside these investor LVR restrictions, banks are able to compete more aggressively for this business.

As a result, borrowers can sometimes access more competitive interest rates and lending terms than they might receive on an existing investment property.

What qualifies as a "new build"?

Generally, the property must be purchased:

• Before construction is completed, or

• Within six months of the Code Compliance Certificate (CCC) being issued, provided it has not previously been occupied as a residence.

For this reason, some developers choose to delay applying for the CCC until the home is under contract, helping maximise the period during which purchasers may qualify for the new build exemption.

If you're purchasing a home that is still under construction, your Sale & Purchase Agreement will usually be conditional on the CCC being issued, as banks generally won't settle the loan until the property has received its Code Compliance Certificate.

So why are investors attracted to new builds in general?

New build properties continue to be popular with investors because they often offer:

• Lower maintenance costs.

• Builder warranties and product guarantees.

• Healthy Homes compliant from day one.

• Strong tenant appeal.

• Potentially stronger rental yields.

• Access to higher LVR lending with some banks.

• In many cases, more competitive interest rates and lending packages.

Every bank has its own lending policy, so it's important to seek advice early.

At Colab Mortgages, we work with all the major banks and specialist lenders and can help you understand which lenders are best suited to your situation, whether you're purchasing your first investment property or growing your portfolio.

If you're looking at purchasing a new build investment property, feel free to download a copy of our free Guide to Building New, packed with practical tips to help you navigate the building and finance process with confidence.