If you’ve decided to purchase a new home, the big question is: will you buy an existing home or build a brand new one?
Like so much in life, there are definite pros and cons to each, which means it is seldom a clear-cut choice. Making the right call comes down to researching and understanding each option, getting good advice from an expert and, most importantly, trusting your gut instincts about what is right for you.
So to help you gain some insight around the pros and cons of buying vs. building, we’ve pulled together 5 key considerations that will help you decide.
Finding the right location
If you’re like most people, location is high (if not top) of your list of priorities when searching for a new home. Finding a place that is close to shops, schools and essential services is not only convenient, it also means your house will be easier to sell or rent down the track should you choose to do so.
If you buy an existing home, you have almost endless options on where you can live, as most suburbs have a good selection of homes available for purchase at any given time. On the other hand, if you opt to build, finding a good block of land in your preferred location can be challenging. With most vacant lots now situated on the urban fringe, there’s a high chance you’ll need to prepare yourself for life in the outer suburbs, or beyond. Alternatively, to secure suitable land in your preferred location, you may decide to buy an existing home and complete a knockdown rebuild, however, this is generally more costly and takes longer than a conventional new home build.
Design and features to suit
One of the best things about building a new home is the ability to design it to suit your family’s needs in every way. When you build, you get to choose a floor plan that ticks all your boxes and then add the additional features and fittings that will make it uniquely yours. While this is certainly exciting, it does come with a few potential risks too. It can be hard to visualise the type of design and features that you want in your head and then bring them to life – and if things don’t go to plan it’s disappointing. There is also the potential for budget blowouts as not everything you want or need may be included in the standard price of your chosen design.
In an existing home, you can see upfront what you are getting, and make your decision based on that. While this does offer certainty, in some older homes you may need to undertake improvements or renovations to bring them up to scratch.
Is it cheaper to buy or build?
Cost is without a doubt the biggest consideration for most home buyers, and the question of whether buying or building is cheaper is frequently asked. With the many factors of location, quality of houses, and the various costs and fees involved in purchasing a home, it is impossible to give a broad definitive answer.
Your best bet is to compare the cost of an existing house in the location you are looking at to the cost of buying land and building in the same area. Don’t forget to add things such as stamp duty and planning fees to your calculations so you get the whole picture. As a guide, you’ll need to include some or all of the following:
Building a new home: cost of land, stamp duty on land, cost of building home, any upgrades or features not included in your purchase price (luxury finishes, window furnishings, etc.), council planning fees and required reports (surveying, soil report, bushfire risk, etc.), cost to prepare land (excavation, tree removal, etc.), service connection, driveways, fencing and landscaping after the home is built.
Buying an existing home: cost of property, stamp duty on the property, pest and building inspection, and any urgent renovations or improvements.
As you can see, the list of variable costs is quite long for buying, which illustrates why it’s important to look at the whole picture. For example, stamp duty may only be around $10,000 on a new home build (as it only applies to the land, not the home) while for an existing property the stamp duty might be $50,000 as it applies to the total cost of the property. However, the money you save on stamp duty can quickly be spent on planning requirements and preparing your land when you build which is why it is really critical to speak to a property expert before you commit.
How long will it take to move in?
A big plus of existing homes is that they are ready now, so once the sale is finalised, you can often move into your home in a matter of weeks. Buying land and building takes much longer, generally between 6–12 months. If you are renting in the meantime, this can add extra financial pressure as you juggle rent and loan payments, so be sure to factor this into your decision and budget.
Securing finance for your home
There is a big difference between a standard mortgage loan for purchasing an existing home, and a construction loan required for those that build. This is because an existing home holds its whole value now, while your new home does not until it is built. Talking to your bank or financial advisor about how the different loans work is an absolute must to find the right option for you.
Finding the right fit
Both building and buying can be a great choice, but the key to finding the right fit is to measure it against your circumstances. Are you keen to live in an established suburb that’s close to the CBD? And do you want to move into your new home sooner rather than later? An existing home is likely a good choice. Or do you like the idea of being the first to live in your brand new home and are not fazed by a longer commute to work? A new home build may work best for you.
We help first home buyers and everyday Australians create a 20% deposit to buy or build a home or an investment property using our exclusive proven strategies. If you’d like to find out more, contact our friendly team, or take the quick quiz to see if you qualify.