Buying or building a home is a huge investment in time, money and emotion. The property market is a constant feature of our media and news cycle, and our screens are awash with advertising for new homes, real estate agents and associated services.
There are costs and benefits to both options. In this article we will take a look at the pros and cons of buying an established home versus building from the ground up.
Buying an Existing Home
PRO: Less Paperwork
When applying for a loan for an existing home, you will generally only need to provide evidence of a regular income, savings, and the amount of personal debt you are servicing.
PRO: Advance Warning
Any potential defects can be identified before the contract is signed. According to Canstar, ‘the potential defects of an established home are often visible or show up in the pre-purchase building inspection to give you a warning about what you’ll face once you move in’.
An established area will have a mixture of styles, architecture, gardens and home types, giving you more to choose from. You also have access to all of the amenities and resources that comes with an established area, such as transport links, schools, hospitals and shopping centres. Social and employment opportunities are also more abundant in these areas.
A newly-built home in a new estate may mean you need to drive everywhere and may not have the ‘feel’ of an older, more built-up suburb. As existing blocks of land in the city and suburbs tend to be bigger than ‘new builds’, their value will increase more quickly.
PRO: Quick Turnaround
You can buy and move in quickly. Settlement on an existing home can be as short as 30 days – and if you bought your home at auction, the purchase itself will have happened very quickly! Building a new home can take many months and the wait time is even longer if you buy off the plan.
CON: Buyer’s Remorse.
With more choice comes harder decisions about whether you have bought the right property, or indeed whether you bought too quickly, when doing more house-hunting could have yielded something just that little bit better.
CON: Age Issues
The older the home, the more problems it may have. Defects and ongoing issues that have not been rectified can be extremely costly to rectify, and ongoing maintenance is usually higher in an established home.
Building or Buying a New Home
What are the advantages of building your home from scratch, or buying off the plan, as opposed to buying an established home?
You can buy a new home in one of two ways – either off the plan from a property developer with an existing design, or by engaging an architect to design your home and a builder to build it.
PRO: Government Assistance
If you are buying a new home (less than five years old) or building from scratch and you have already laid the foundations of your home, you may be eligible for the First Home Owner’s Grant. The grant is only available for properties that are less than five years old.
In addition, stamp duty is not payable on a new home, though you will still pay it on the value of the land.
PRO: You can build what you like
If you can’t find anything on the market that suits your needs, you can build a home to your own specifications, with total control over many elements of the build. Keep in mind though that building from scratch means paying for things such as fences, driveways, landscaping and fixtures and fittings that are already included in an established home.
PRO: New homes are better for the environment
New homes must include energy and water efficiency features with requirements differing from state to state. The Nationwide House Energy Rating is a star rating from 0 to 10 that measures how energy efficient a house is based on its design. Since 2013, new apartments built in Victoria must achieve an average 6-star rating collectively for all sole-occupancy units and not less than a 5-star rating for each individual unit. New standalone homes must achieve at least a 6-star rating.
An energy-efficient home can significantly reduce your heating and cooling bills.
CON: Patience Required
On average it takes around 8 months to build a new home from scratch. Some lenders will stipulate that a house be completed or partly begun within a certain timeframe as part of their loan conditions.
If you have already sold your home, you will need to find somewhere else to live while your new home is being built. If you are moving into a new estate and your home is completed early, you can expect ongoing construction noise and dust.
CON: Not Necessarily Cheaper
Land in most capital cities around Australia costs a premium and land prices are growing all the time. Building further out may mean cheaper land costs but less access to infrastructure and amenities.
Building costs are not fixed and can quickly become ‘budget blow-outs’ if you aren’t carefully monitoring costs and the quality of workmanship.
If you buy off the plan, check your contract thoroughly to make sure you know what fixtures and fittings are included in your home – the high-end fittings and fixtures may have been for the display home only
CON: Lots of Paperwork
Construction loans require copies of building permits, building contracts, building plans and building insurance. You will need to let your lender know along the way of changes to the building plans, costs or contracts.
Whether it’s cheaper to build new or buy established will depend on what part of Australia you live in. It’s important to do your research before you make a decision on what path you are going to take.
Are you investing, downsizing, upsizing or just looking for a change of scene? The Home Inspection Hub can help you make one of life’s biggest decisions by conducting a pre-purchase, pre-sale or new home construction inspection.
Our inspectors cover all areas of Melbourne and surrounds and will send you an electronic report within 24 hours of your inspection. Our inspectors are fully qualified and insured, with a wealth of knowledge and experience.
Call us today on 1300 071 283 or click here for a quick online quote. We look forward to helping you on your property journey!