When comparing two investment properties, most investors focus on the sticker price and assume the choice comes down to personal taste. However, according to recent data, the figure that actually decides your financial outcome is the after-tax cost to hold the property each week, not the initial purchase price.
On this measure, a brand-new build can cost roughly half as much per week to hold as an established home at the same price.
The Three-Layer Cost Test
To find the real value, the sources recommend looking past the sticker price and using the Three-Layer Cost Test:
- Layer 1: Cost to Get In While deposits are similar, stamp duty is where the paths diverge. Purchasing a "house and land" package through a two-part contract typically means you only pay duty on the land value, potentially saving tens of thousands of dollars compared to paying duty on the full price of an established home.
- Layer 2: Transition Cost Established properties have a short-term advantage because they earn rent from day one. A new build typically has a 9-month construction period with no rental income. However, this is partially offset by lower interest costs during the build, as construction loans are only drawn down in stages.
- Layer 3: Stabilised After-Tax Cost This is the "multi-year cashflow" layer. New builds generate significant non-cash depreciation deductions—often around $16,000 in the first year. In a worked example for a 750,000,−∗∗106 per week**, compared to for an established property.