When looking to purchase a property, one of the first questions you might ask is, “Should I build or buy an existing home?” There are benefits and pitfalls of each option and the following article will guide you through some of the important points to consider when making your decision.
One of the most important factors in your decision will be the various costs associated with building versus buying an existing home and how these fit with your budget. Typically (but not always), building will involve a higher initial cost, although ongoing maintenance costs will be lower, particularly with the builder’s warranty in place.
Taxes and grants will affect upfront costs as existing home purchases will incur higher stamp duty while government grants are available when building for eligible applicants.
How much will it cost to build?
The total building cost will be made up of two major components:
- Land – this will depend on the size and location and may be estimated by researching online or talking to local real estate agents.
- Construction – research the building process and ask a local builder about the various costs for different building options, such as standard versus custom design and single versus double storey. When making your estimates, ensure you account for all of the extra costs of building by reading our article on the ‘9 hidden costs of building’.
Check out our fixed price home & land packages for an accurate estimate of the total building cost including land.
How much will an existing home cost?
The cost of an existing home may be estimated by researching online listings. Ensure to include the cost of repairs, renovations or extensions as often older homes are functionally obsolete (e.g. 4bed 1bath) and require a makeover to suit a modern lifestyle. These costs must be paid from your own pocket as generally the bank will not finance this type of work.
There are many reasons for choosing a location to purchase property such as budget, purpose (to live in or investment), personal circumstances and lifestyle preferences. In well established areas, vacant land is scarce and you may need to settle for an existing property.
If you are struggling to find land in a particular area of interest, contact us as we specialise in providing multiple home & land options in these desirable, built-out locations.
You can move into an existing home right away. Building will take longer, typically 5-10 months depending on council approvals, complexity of the home and weather delays. Remember to consider living arrangements during this time.
Both options are not without risk. Existing homes carry health (asbestos, leaded paint) and structural (termite infestation) risk. These may be mitigated by having a qualified professional conduct a building and pest inspection. Building risk may be mitigated by using a reputable experienced builder.
In most cases you won’t get exactly what you want with an existing property. On other other hand, building gives you control over the design, level of finish, materials and overall budget. Furthermore, building allows you to incorporate eco-friendly features such as solar panels, natural lighting, and efficient heating and cooling systems.
Building for Investment
Building in well established areas can often result in an equity uplift on completion. This may be estimated by comparing the market price of newly constructed homes versus the price of a comparable home & land package. A newly constructed home will also offer higher depreciation benefits compared to an existing property, as well as more resale appeal to owner occupiers.
The Bottom Line
Existing homes offer convenience and typically a lower upfront cost compared to building in a comparable location. You can inspect the property before buying and move in right away. However, in most cases you will not get exactly what you want and repairs, renovations or extensions paid for out of your own pocket will be required to meet the modern lifestyle.
Whilst building requires a longer timeframe, you have control over the budget, design, materials and level of finish. Furthermore, with our home & land packages, you can tailor to suit your needs and know the total cost before you commit.
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This article is general in nature and should not be relied upon for individual decision making purposes. For specific advice regarding your individual circumstances, contact accredited professionals.