Building vs buying a house

Prospective home-builders beware, the costs of building a brand new home aren’t anything to sneeze at. Before you even get to your construction costs, you need to find and purchase a block of land to build on – which generally costs hundreds of thousands of dollars alone depending on size and location.

Once you do get into the construction phase, you’ll have to contend with the cost of building materials, labour and any optional extras you want incorporated into your new home. You’ll also need to separately consider any painting, decorating and/or landscaping expenses that may be applicable, as these typically won’t form part of your initial construction costs.

When it comes to buying a house, aside from paying the actual purchase price, you’ll typically also have to pay:

• Government costs, including stamp duty and a mortgage registration fee
• Lender fees, including a loan application fee and potentially also valuation fees, document preparation fees and settlement fees.
• Solicitor/conveyancer fees
• Building and pest inspections.

With all these potential costs, you may want to calculate your estimated property-buying costs before you get the ball rolling on your next home purchase.

If you’re building your own home, that means you can choose how it looks, how the floor plan is laid out and more. Provided you’ve got the budget to back up your desired choices, this little corner of the world is your oyster!

One of the upsides of a new build is that you can incorporate various energy-efficient measures into the house, such as solar panels, the type of insulation you choose, double-glazed windows and energy-efficient lighting.

Making your new home as energy-efficient as possible could help reduce the cost of your energy bills for as long as you live in that house.

If this is your first time building a home from scratch, you may be taken aback by the unexpected costs and delays that can come with the home-building process. Any given construction project could suffer from delays or budget blowouts, so it’s not the end of the world if yours does – just make sure you’re mentally and financially prepared for the stress this could cause!

In order to build a new house, you’ll need to find and acquire some vacant land to build it on first. While vacant land may be found here and there in inner-city areas, the vast majority of available land in any given city will be further out, and farther away from the city centre than you may have hoped for. Even if you do find vacant land in your desired suburb, it may not be as large a lot as you’d hoped.

While your new home is being built, you’ll need somewhere else to live. Depending on your financial situation, you may choose to continue renting or paying the home loan on your current home until your new home is built, or you may choose to stay with family or friends until construction is done.

Whatever your living situation ends up being while construction is happening, you’ll most likely have taken out a construction loan to finance the building of your new home, which you’ll also be paying off at the same time. The good news is that construction loans are typically interest-only during the construction phase, meaning your repayments will only need to cover the interest being charged on the loan rather than that along with the loan principal.

That being said, the size of your construction loan repayments will still depend on your loan amount and its interest rate.

When buying an existing property, you can examine it, research it and have it inspected from top to bottom, and subsequently come away knowing all there is to know about the property in question. This removes some of the uncertainty you might get with a new build and allows you to understand exactly what you’re paying for.

Even the most protracted of property purchases will likely take far less time than buying vacant land and building a brand-new home on it. If you’re looking to become a homeowner sooner rather than later, buying may be a more suitable option than building.

If you’re looking for an established home, you’ll typically have a greater selection of locations to choose from than if you were looking for vacant land to build on. This will be the case even more so in heavily built-up and inner-city areas, in which you’re less likely to find vacant land zoned for low-density residential construction.

If you’re planning on buying an existing house, you’ll want to keep an eye out for the wear and tear that can come with older homes. Even if you’re only looking at newer homes with not too much damage or wear for the present, it’s always worth considering the maintenance costs you might pay as the owner of any given home.

While there’s no shortage of costs you’ll pay while building your own home, some fees may end up being higher when buying a house.

For example when considering stamp duty, although you’d still pay stamp duty on the purchase of land you’d be building on, you’d likely be paying more stamp duty for a house purchase, owing to the difference in value between a piece of land and a piece of land with a house on it.

One of the most significant downsides of buying an established property instead of building a new one is that you may not find an existing property that ticks all of your ‘dream home’ boxes.

You could always purchase a home and then conduct renovations to get it closer to what you had in mind, but being able to build your dream home from scratch may be a more appealing option depending on what kind of existing properties are currently on the market.