Do New Construction Homes Lose Value?

Do New Construction Homes Lose Value?

Justo Team | July 15, 2021

There are plenty of new construction opportunities in just about every city in Canada. Whether you’re considering purchasing of a condo, duplex, or single-family home, you’re probably wondering whether the headaches of building a new home are worth it.

If you’re considering whether you should buy a new construction or an existing home, it’s very smart to investigate whether your home will lose, retain, or increase in value. 

There’s a lot to consider and the answer to the question, ‘Do new construction homes lose their value?’ isn’t as simple as a ‘yes’ or a ‘no.’

There’s a lot to consider when you’re making such an important decision. Unfortunately, the answer isn’t as simple as ‘yes’ or ‘no.’

The evidence is clear that while housing costs do decrease from time to time, over the years, real estate prices have always risen. According to CanadianRealEstateMagazine.ca, Toronto property values have increased 128% in just the past 10 years! 

That’s an excellent return on investment.

However, it is possible to lose value on a new construction home.

This article will explore two topics to help you determine whether your new construction home will lose its value.

  1. Things You Can Do To Help Your New Home Retain Its Value
  2. Ways To Get the Best Deal On Your New Construction Property

By the end, you should have a lot of clarity as to whether or not buying new construction is the right choice for you.

1. Things You Can Do To Help Your New Home Retain Its Value

  • Spend your money wisely.
    The beautiful thing about building your own home is that you get to design it yourself. But luxury customization, while it might be fun, probably won’t offer much return on investment. Some customization options that don’t increase your home’s value:
    • High-end kitchens if the rest of the house isn’t the same quality
    • Garage conversions
    • Wine cellars
    • Oversized additions – you want your home size to match the homes around you, not be the biggest on the block

Make sure your home design is balanced. Unless you plan to make this build your forever
home, keep the next owners in mind when you design and decorate your new house.

  • Keep the fixtures simple.
    You can always replace light fixtures and faucets down the road. Spend your money on good quality fixtures with a warranty (some even have lifetime replacement warranties!) if you plan to sell within a decade or so, and don’t worry about the high-end, fancy finishes.
  • Try to pay the highest down payment you can.
    Putting as much down on your home as possible will lower your principal mortgage and help make sure you profit as much as possible from the eventual sale of your home. The smallest amount of interest you pay, the better. Having a larger down payment will also help you avoid paying CMHC mortgage insurance.

    Speaking of finances, make absolutely sure you can afford your new home. Paying penalties or getting into a mess making late payments is going to cost you in interest fees, and eats into your profits when you eventually sell.
  • Plan to stick around for a while.
    It’s possible to get a great deal on a new home and have it appreciate in value almost immediately. However, if you’re paying a bit more than comparable existing homes (this is possible because you’re paying for brand new finishes, appliances, and new technology), plan to stick around long enough for the market to catch up.

    Your home’s value will likely increase quickly along with the rest of your neighbourhood, especially as construction finishes and the community feels more established. So plan to stay in the house for at least 5-10 years if you’ve overpaid on the market value.
  • Choose your community wisely.
    There are many considerations when choosing the community you will live in. Some are personal, but other important reasons are practical. Think about what the next owners would like as well. Do some research and make sure your neighbourhood has schools, a hospital, rec centers, or other amenities that future owners will value.

2. Ways To Get the Best Deal On Your New Construction Property

There are some things you can do to get a little more bang for your buck when you build a new home. If you can lower the cost and keep the principal loan smaller, you might in the green the very first night you lay your head on your pillow.

  • Be the first in a brand new community to buy.
    Whether it’s a new condo, duplex, or single-family home you’re buying, being among the first to make a commitment in a new development will help lower the costs. Builders know that you’ll have a few years of construction noise to listen to and that your community might not be established for a while. They also offer great incentives to build excitement about the project. Getting in early can save you 10s of thousands of dollars and maybe get you some upgrades too!
  • Be the last in a brand new community to buy.
    When a new development has only a handful of properties left to sell, they may offer some incentives to unload them quickly. It’s possible prime locations have already been snatched up, but you might be able to get a brand new home for a really good price.
  • DIY some things.
    You’ve probably seen people who move into a new home and have no grass, no deck, and an unfinished basement. That’s because these are things that are much cheaper to do on your own over the next few years than to have done at the time of your home build. Work away at these finishes slowly and as you are able to. When they’re done, they’ll add a lot more value and you’ll have saved money in the process.
  • Keep things simple and classic.
    Designing a classically styled home holds value much better than installing trendy finishes. Those shiny navy blue cabinets might look really cool! But when they are no longer the style, chances are, the next owners will see your kitchen as ‘needing to be remodelled’ instead of ‘fun and trendy.’ The same goes in your bathrooms. Keep it simple, Sally.

The answer to the question, “Do new construction homes lose value?” really depends on the choices you make when building and when you choose to sell your property. At Justo, our super knowledgeable agents are very good at explaining how different developments in the city will retain their value. If you’re unsure about an investment or need guidance, give us a call. We’ll be glad to sit down with you and explore your options.

Justo
By Justo Team

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