Deciding whether to build your own house or buy an existing one can be a tough decision. The allure of picking out the floor plan, features and fixtures with a new build is exciting, but does that come with a steeper price tag? A careful examination of the cost differences between the two options can help prospective home buyers decide what option they should choose.
When looking to buy a home, one question buyers face is whether to purchase an established property or buy land and build a house from scratch.
While both methods offer significant financial and social benefits, ultimately, the “better” way depends on the priorities of the buyer.
Are you ready to take your first step into the property market but are not quite sure if it’s cheaper to build or buy a house? This can be a tricky question to answer, and a lot of the time, it will come down to your individual needs and wants. We’ve put together some pros and cons to consider that may help your decision further along.
How Covid-19 Has Impacted Costs When Building A House?
While it’s hard to be clear exactly how much COVID-19 has impacted costs when building a house, it’s fair to say that it has changed the landscape with so many changes, border closures and restrictions.
Thanks to volatile exchange rates, supply chains being impacted (and therefore not as reliable), and reduced productivity due to COVID-19 restrictions, in some cases, it has taken longer to see projects complete, and consequently, a rise in construction costs could be evident.
Buying An Existing Home:
- Moving in is much faster; in many cases, settlement can take as little as 30 days.
- Often, buying an existing home means having an established neighbourhood. This means that you’re more likely to be closer to schools, shopping centres, work, and public transport, reducing travel length and giving you more free time.
- Those building a home often overlook the cost and time needed to put in a garden to go with their new home. Buying an existing home can reduce these costs by having an already established garden with a lawn.
- Probably the biggest downside to buying an existing home is that you will have to compromise with areas of the house that you may have designed differently had you built it. You need to weigh up which locations you are willing to compromise and if it is best for you.
- Turning an existing home into your dream home can often become quite expensive with renovation costs. Make sure you consider the future changes you may want to make to the house and its price.
Building A New Home:
You’re able to save costs on stamp duty as you’re only paying duty on the land.
- Depending on what state you live in and your circumstances, you may be eligible for the First Home Owners Grant.
- One of the most promising and appealing aspects of building a new home is the level of personalisation you’re able to do. You can design a home for your needs and lifestyle without having to compromise if buying an existing home.
- Many new homes built today factor energy efficiency into the build plan. In this day and age, there are enormous options available to build a better home for the environment while also saving you money in the future on bills.
- With a new home, you’re less likely to have maintenance issues as the house is built with fresh materials. However, if problems do occur, you’re likely to be covered under warranty.
- The building can take a long time. Often, you will be looking at 4-12 months, if not longer, to build a home.
- While your new home is being built, you still need to have a roof over your head. You may have to rent a house or make costly financial arrangements elsewhere while in production, adding to the cost of building your new home.
- A big issue with buying vacant land is that it’s rare to find land close to city centres. You may have to instead compromise on convenience and see an increase in your commute time.
- Costs are not fixed. You may encounter several unavoidable issues like changes to the building plans, additional materials needed and the like when building, so keep this in mind when looking at if it’s cheaper to buy or build a house.
What Does It Cost To Build A House?
The main factor that will affect you is how many paper lobsters you have loaded in your bank account to finance your need to build. It will also be determined by whether you have the patience as building a house from scratch takes time. You will have to factor in upfront costs, such as the lot price, landscaping, and energy efficiency.
Building a house is not as simple as buying a land plot and planting the first brick to get it up and going. There is more to it. Depending on where you choose to build, the median price you’ll pay for a vacant block of land varies from a region in Australia. HIA and Corelogic released some recent data showing that the estimated median construction costs. When combined with the estimated median construction costs for a three-bedroom brick veneer home on a level block of land with medium finish quality, the price increases
The cost of Stamp duty
When calculating the total cost of your house, you will have to keep the stamp duty that comes with it in mind. The price for stamp duty will differ depending on where you decide to plant your roots. The cost can be reduced for first home buyers through a concession on your stamp duty. However, this will depend on the state or territory you live in.
It could take thousands of dollars and years to get your yard into what you desire, which is a factor that you will have to think about when choosing to build. The average cost of landscaping in adding drought-proof plants in Australia could cost you anything from $12.99 for 120mm to $29.99 for 180mm.
New homes usually take the cup for beating establish homes when it comes to energy efficiency. With their unique designs of being energy efficient using the natural elements, and clever use of building material to power the house, they can consume 21% less than older homes. This will be a welcomed factor if you are looking to cut your energy bill and a significant selling point when looking to resell your home.
The Cost Of Buying A House
Looking at the median house price, Domain released a report that shows how much you could be forking out for an established house.
An established home beats a newly constructed house when it comes to landscaping. The land on which the house sits is usually more significant. A lush landscape setup usually takes a few fixtures to configure and turn into your desired view with little cost compared to a newly built house.
Buying a house can come with the fact that most of the buildings are based on old designs that were not so energy-friendly, which means you could be paying a lot on your energy bill. There is also the factor of maintenance costs that come with an established home which can cost you. In this case, it would be advisable to set up a maintenance budget that won’t burn a hole in your pockets.
It will all boil down to what you need and whether it matches your budget. If you are looking for an extra financial injection to help you attain your home, then.
Hidden Costs Of Building A Home
When you walk through a model home, it’s usually beautiful. The problem? That model home usually has every single upgrade added to it. The starting price you see advertised does not include any of these upgrades. If you want your house to look anything like the models, be prepared to shell out tens of thousands of dollars for upgrades. The countertops, finishes, flooring, bathrooms, kitchens and more are typically upgraded in the models.
As builders work to turn out as many new homes as quickly as possible, quality can become an issue. When you do your final walkthrough, you may find many things that need to be fixed. The builder should cover these costs in most cases.
However, there will most likely be defects in the house you don’t catch during the final walkthrough. Some of these may be covered by your home warranty (assuming the builder provides you), but some may not. You may not see things like foundational issues or the effects of low-quality materials until you are outside of the window where you can do anything without coming out of pocket.
Existing homes have had time to work through these issues, or at least expose them so that you can make a more informed buying decision.
Necessities not included
When you buy an existing home, you get everything that you see. However, many of the things you might expect to be included in the cost to build a house are probably not. Some of these things might be fences, landscaping, appliances and some other outside the home features. Make sure when weighing the cost of a new build vs. an existing home, you know exactly what you’re getting and, more importantly, what you’re not.
Why Might You Prefer to Build A House?
Building a house is not something people take lightly. If you are looking to build a house, it’s usually for a reason. Weighing out the pros and cons of building your own home is a serious issue.
Some of the more significant perks of building your own home include:
- Custom Designs- A home that you build is a home that’s made for you. This means you get all the features you want and none of the ones you hate.
- New Home Goodness- Being the first to live in a home means you don’t have to deal with wear and tear. It also means that your resale will probably be higher.
- Cost Recouping- When you sell your home, you’ll be able to recover most of the money you paid for your building.
- Up to Code- Older houses are less likely to be totally up to code than newer ones. Depending on local laws, old homes may be able to be “grandfathered in,” or you might be forced to get the building up to code. This can cost extra money.
- Lower Bills- New homes are usually outfitted with energy-saving devices and materials, making them more cost-efficient than older models.
- No HOA- If you build your own home, the chances are high that you won’t be part of a Homeowner’s Association. This means that you will be able to avoid HOA fees and nosy groups.
Why Might You Prefer to Buy A House?
Buying a house is the typical go-to for people who want to own a home, and for a good reason. It’s a convenient way to get a place of your own. Plenty of homes already exist, and truthfully, there are parts of the country where you really can’t build a new home.
Some of the more common reasons people decide to buy a home include:
- Convenience- It’s a lot easier to buy a house than build one, especially if you consider getting a home in a city area. Buying a house involves less paperwork, less design work, as well as fewer zoning issues. If you’re looking for an easy way to get a new home, buying is it.
- Price- Prices on homes are negotiable since there will likely be parts of your new home that you won’t like. With building a home, you don’t have as much negotiation power. Moreover, it’s generally cheaper to buy a home that’s already built.
- Quick Move-In- It takes an average of 7 months to build a house. That means that people who are making a home will need to rent a place during the interim. If you buy a house, you can move in right after closing.
- Less Stress- Building a house is notoriously stressful. Between arguing with contractors, worrying about the layout, and trying to find suitable materials, it’s a nightmare for most of us. Buying is just more accessible overall.
- Easy Upgrades- If you want to buy a house, upgrading it is usually easier and cheaper. You also have the added perk of doing them at your own pace.
What it takes to buy vs. build
Buying a new home is exciting, but it does come with many additional challenges. First, you may be required to put down a much higher earnest deposit (the money you set aside for the seller in case you fall through on the deal) during the buy or build process — it’s the same with both.
On existing homes, your earnest deposit is around 1% of the home cost. With new builds, the standard is 5% and can go as high as 10%. This means you’ll need significant cash upfront to get the process started. You will get this money back if you go through with the build or purchase, but it needs to be weighed in the decision-making process.
You’re also going to need time. New builds, according to Realtor.com, can take on average between three and six months. More custom builds can take longer. Additionally, builds don’t always stay on schedule. The point is you need to be ready to visit in your existing living situation while you wait on your new home to be completed — unless you buy a preexisting home, which will significantly reduce the time you’ll wait to be in your new home.
When Does Building a Home Make More Sense?
If you’re a stickler for the details, opting to build something that fits your specifications may be the best bet. You’ll have to wait until the home is completed to move in, but if you’re comfortable renting for a few more months, that may not be an issue.
Cost is an important thing to factor in when building a home since you’re not only paying for the materials, but you’re also purchasing the land it’s going to sit on as well. It’s tempting to go crazy splurging on high-end upgrades, but if you’re rolling all of that into a loan, you need to be clear about how it’s going to increase your mortgage payments. Building the perfect home won’t necessarily be worth it if you’re struggling each month to hang on to it.
Building Vs. Buying: Which Is Right For Me?
There is no single correct answer to this question for all people. The answer to the build vs. buy question for you depends on your wants, financial situation, logistics and where you’re looking to live. Take the time to weigh the different options for price, quality, and how they meet or fail to meet your family’s needs.