16-12-2022

Buyers of real estate often wonder which properties are more profitable to acquire - primary or secondary. There is no single answer, since each option has its own tangible pros and cons. CEO of the international premium real estate agency Mercury Group Ltd Irina Alazova talks about the advantages and disadvantages of the primary and secondary market, which should be taken into account before making a choice

Primary and secondary market

The primary and secondary housing markets are not at all distinguished by the novelty of the apartments and the fact that no one has lived in them, but by one important legal detail of the transactions. Only housing purchased directly from the developer company is considered primary.

As a rule, a primary property is bought at the construction stage, or even before it starts - at the off-plan stage of the project. In this case, the buyer gets acquainted with the property exclusively through project documentation and visualization.

But if you buy real estate from an owner who previously purchased it from a developer, such transactions take place on the secondary market, since ownership passes from the first owner to the second, although the housing itself is completely new, or has not yet been put into operation.

Legal support of the transaction in the primary and secondary markets is of equal importance. The opinion that the process of buying from a developer is more transparent and safe is a myth. We recommend entrusting the legal support of the transaction to specialists who will pay attention to any pitfalls of the contract.

Primary real estate: advantages

INSTALLMENT OPTION

Installment and phased payments are possible only when purchasing a new property. For example, in the UAE, developers provide a convenient payment plan: when reserving an object, the buyer usually pays 10-20% of the cost of the object, the rest of the amount is paid in stages during construction, and the final 20-40% - the buyer pays only when the object is put into operation.

In European countries, the standard reservation fee is up to 30%. The remaining cost of the object is paid either by agreement or after the object is put into operation.

LESS TRANSACTION COSTS

As a rule, the transaction costs for the purchase of new properties are less, since, in fact, the costs of legal support are excluded, which are completely covered by the broker or developer.

In many countries, VAT is included in the price of new real estate. When it comes to investing in real estate, it is more profitable for an investor to purchase real estate for a legal entity.

BETTER QUALITY AND COMFORT

During the construction of new projects, new technologies are used, new engineering systems, ventilation, and increased noise insulation are installed. The materials used in the construction are of higher quality and modern design.

In new residential complexes, layouts are thought out and improved, and during the construction phase, in some cases, buyers can make changes to the layout and equip the interior to suit their tastes.

CONS

HIGHER RISKS

When buying off-plan properties, there is a risk of freezing construction and delaying deadlines: developers often use money received from the sale of real estate that has not yet been built, as well as credit funds, for construction, so problems with sales and serious economic crises in the country can lead to a suspension construction work.

EXPECTATION

The earlier the construction stage, the cheaper the housing will cost, but the longer it will take to wait for the object to be put into operation in order to move in and live, or rent out the property and receive passive income.

As a rule, the construction of an off-plan project takes 1.5-3 years. Until the developer hands over the object, you do not own anything - you do not have an apartment, there is only the right to claim real estate.

Secondary market: advantages

LESS TIME TO TAKE OWNERSHIP

Compared to objects under construction, which are built within 1-3 years, the time for processing a transaction in the secondary market is much shorter - an average of 30-45 days.

As a rule, immediately after choosing an object, the buyer signs a preliminary agreement, an examination of the object is carried out, an agreement is concluded, the purchase amount is paid to the transaction account and the property is registered in the land registry - immediately after which you can receive the keys to your new home and start moving.

ALREADY COMPLETED INFRASTRUCTURE

You don't need to worry whether the kindergarten and school will be completed or you will have to take your child to the other end of the city. Resale housing is always located in a residential area, you will know exactly how many schools, hospitals, shopping centers there are in the area.

OPPORTUNITY TO MEET NEIGHBORS BEFORE BUYING

If this point is of great concern to you, you can always find out who surrounds you and based on this make a decision on the transaction.

CONS

WORN COMMUNICATIONS

It's only a matter of time before you have to change the wiring or pipes, and during the operation of the housing there will be leaks, breakdowns, short circuits - companions of all old houses.

MORE MAINTENANCE AND REPAIR COSTS

Resale properties are less energy efficient compared to primary properties. It is worth recalling that the owners of such housing are responsible for the repair of common areas and, as a result, additional costs for contributions to the savings fund or payment of estimates. In turn, for primary housing there is a guarantee from the developer, usually from 2 to 5 years, during which the construction company bears all the costs of any repairs.

Mercury Group has been operating in the international real estate market for over 22 years. We offer our clients the best properties in the primary and secondary market: both for personal residence and as an investment in order to obtain a stable passive income.

We provide comprehensive support in the process of selection and purchase of real estate, investment projects and obtaining a residence permit.