During your search for a home, you may consider buying a new housing development or condominium. What are the benefits of buying a new home versus an existing home? What makes the most sense for you and your family? Here we will discuss buying a new build – what you need to know.
Buying a New Home vs an Existing Home: Pros and Cons
Buying New Build: Pros
- New builds offer modern conveniences like open floor plans and state-of-the-art appliances.
- Depending on the stage of the build, you may be able to customize things like floor and wall colours, though your options may be limited.
- Because a new build is brand new, you may not need to pay as much for home repairs in the first 7 years of living in your home as you might need to in an existing home.
- New homes come with a warranty in case repairs do need to be made. At minimum, home warranty insurance will cover 2 years for labour and materials (with some restrictions), 5 years on the exterior of the building including walls, foundations, roof, windows and doors, and 10 years on the structure of the home.
- New homes are more energy efficient as they are built with modern building codes.
- New homes are built in new communities with new infrastructure.
Buying Existing Build: Pros
- Existing homes are often less expensive than new homes.
- The prices of existing homes can be negotiated unless there is a bidding war.
- Existing homes are usually located in established neighbourhoods with better infrastructure.
- Existing homes have more character and charm than newer, modern homes.
Buying New Build: Cons
- A new home is typically more expensive than buying an existing home, and the price is often non-negotiable.
- If you decide to customize your home, anything beyond the base model will cost extra.
- New developments are often built in underdeveloped neighbourhoods where amenities aren’t close by.
- Because new builds are often located in developing communities, you may need to get used to the sounds of construction sites until the community is developed.
- You will have to pay GST on new builds, though some exceptions may apply (I will touch on this later).
Buying Existing Build: Cons
- You will need to spend more money on maintenance and repairs on an existing home than you would on a new home.
- If you plan to remodel your home, you may have to pay extra money to have your old building brought up to code.
- Your existing home may not be as energy-efficient as a new home.
- An existing home may come with outdated appliances.
Paying GST on a Home
Unlike existing homes, new builds are subject to a 5 percent GST charge that is due at the time of completion. That means your $600,000 purchase would require a $30,000 GST payment. There are some exemptions for GST on new homes:
- New homes under $350,000 are eligible for a 36 percent rebate on the 5 percent GST, up to $6,300.
- New homes between $350,000 and $450,000 are eligible for partial rebates.
- Homes over $450,000 are not eligible for any GST rebates.
Newly Built Home Exemption
The Newly Built Home Exemption is offered by the Government of British Columbia to reduce or eliminate the amount of property tax you pay on your new home. To qualify for the Newly Built Home Exemption, you must be a Canadian citizen whose new principal residence is smaller than 1.24 acres, has a market value of $750,000 or less, and is located in British Columbia. You are eligible for a partial exemption if your principal residence is larger than 1.24 acres, and has a market value between $750,000 and $800,000. Learn more about the Newly Built Home Exemption and if you qualify here.
Buying a New Strata Property
Buying a new condo or townhome is an affordable option if you’re looking to buy a new property but can’t afford a newly built home. A new condo or townhome will typically be managed by a strata corporation, but your new property will still come with home warranty insurance. GST and property transfer tax will still apply to new strata properties. The same Newly Built Home Exemption and GST rebates apply to new strata properties.
If you’re buying a condo or townhome as a rental property, be sure to review the strata by-laws as some strata properties do not allow for short-term or long-term rentals. To learn more about strata management corporations in British Columbia visit the Canada Mortgage and Housing Corporation here.
When considering buying a new build – what you need to know is there are pros and cons to buying a newly built home and an existing home. Take your budget, lifestyle, and your goals into consideration when deciding between a new build and an existing home. Can you afford the maintenance of purchasing an existing home? Is a modern floor plan important to you? Is affordability a deciding factor? Whether you’re buying a new home or an existing home, I’m here to help you every step of the way. Feel free to call me directly at 604 302 0177 if you’re considering buying or selling your home. I’m committed to helping you find a home you will love!
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