In today’s property market, shaped by tighter lending, rising interest rates, and greater tenant expectations, new builds are becoming an increasingly attractive option for Kiwi investors.

Offering convenience, compliance, and modern appeal, they tick a lot of boxes … but they also come with their share of drawbacks.

The appeal of new builds is rooted in their simplicity and modernity. You’re unlikely to be hit with any major maintenance costs early on, and most come with a 10-year master build guarantee. For investors wanting a “set and forget” property, that’s a real advantage.

The upsides

One of the major benefits of buying a new build is that it’s ready to rent straight away. These properties are typically constructed to meet Healthy Homes Standards, saving landlords significant costs in retrofitting older homes.

They’re attractive to tenants because they’re warm, dry, and well-insulated. Features like double glazing and heat pumps are standard in most developments now.

New builds also tend to attract longer-term, higher-quality tenants, thanks to their comfort and presentation. With no need for immediate repairs or upgrades, landlords can avoid costly upfront expenses like new carpets or insulation.

Financing is often more accessible too. Current lending rules may allow investors to purchase new builds with a deposit as low as 10 per cent, providing an entry point for buyers with limited capital. And when located in larger subdivisions or master-planned communities, properties may benefit from gradual value uplift as infrastructure like parks, schools, and retail precincts is developed.

There’s also a psychological appeal to tenants and buyers. People like being the first to live in a home – it feels fresh and clean, which helps with rentability.

The downsides

While new builds offer simplicity, they don’t guarantee high returns – especially in the short term. One of the most common misconceptions is the expectation of quick capital growth.

There’s not a lot you can do to add value to a new build. With older homes, you might renovate or extend and see an immediate increase in value. With new builds, you’re fully reliant on the market, and that growth can be slow.

This lack of potential for manufactured equity can make new builds less appealing to investors focused on active wealth building.

The uniformity of large-scale developments also creates a competitive challenge when it comes time to rent and sell, as many homes have identical layouts, finishes, and features.

You can end up competing with half a dozen properties just like yours. That limits your ability to stand out or command a premium.

You may have paid a premium when you purchased the property brand new, which is not uncommon: this can take time to recover from and hurt your wallet.

Space can also be a drawback. Many new builds are designed to maximise density, which often means smaller floorplans, compact sections, and limited storage. Garages are increasingly rare, and off-street parking may be minimal – or absent altogether.

For families or tenants with more than one car, that can be a deal-breaker. And it’s something that can affect resale down the line.

Another often-overlooked factor is the presence of hidden costs. While show homes appear turnkey, the base price may not include essentials like window coverings, extra heating or cooling, and landscaping.

Window treatments alone can cost thousands. You might think you’re getting a finished product, but there’s often still things to do before the property is fully tenant-ready.

Perhaps the most pressing concern for today’s investors is cash flow. With mortgage rates high and yields under pressure, some new builds are generating less rent than is needed to cover loan repayments.

A lot of investors are finding themselves having to top up the mortgage. That might be manageable on one property, or if it is a small amount, but if you’re holding several, properties or interest rates rise, it quickly becomes unsustainable.

Final thoughts

New builds can be a smart move for investors seeking low-maintenance, compliant properties that are attractive to tenants. But they aren’t without risk. From limited value-add potential and uniformity issues, to hidden costs and possible negative cashflow, it’s essential to go into a purchase with full awareness of the financial realities.

They have their place in a smart portfolio. But investors need to be realistic. Do your sums, understand the ongoing costs, and don’t assume a new build means guaranteed capital gains or cashflow.

As with any property purchase, due diligence is key. For those considering a new build, consulting a local property valuer can offer insight into the real-world performance of similar homes – beyond what the brochure promises.

For more of Eve’s expert tips you can follow her at @eveprousepropertyvaluations or her website eveprouse.co.nz