Getting a Home Loan in Australia if you're living overs...
29 Nov 2023
If you're looking to buy a property, one of the first considerations is whether you should build or buy. Find out here the pros and cons of buying vs building a house.
If you’re looking to buy a property, one of the first considerations might be whether you should build or buy. With record-low interest rates and many government incentives currently available to new home buyers and builders alike, it could be a great time to address the question of whether it’s better to build or buy a house.
Before we dive into the differences between building and buying, let’s briefly discuss costs. One of the main factors new homeowners will be considering is the cost of owning a home. Unfortunately, there is no set answer to whether it’s cheaper to build or buy. It can go either way, depending on exactly what you want in a home and where you want it to be.
CoreLogic data from April 2020 revealed that it was cheaper to buy an existing home in all capital cities except for Sydney where it was cheaper to build. However, in the current housing market boom, these figures may not be representative of the prices to build and buy today.
Let’s discuss the pros of building. Of course, other than the appeal of something shiny and new, there are notable benefits to building a new home.
When you build your own home, you have the flexibility to change aspects of the design, from the floorplan all the way to the type of benchtops you’d like. You’re in control of the finished product, unlike with an existing build which is more ‘you get what you get’. You can design the property to be exactly what you want it to be: if you work from home, you can add in a home office; if you’re a movie fanatic, you can add in a home cinema. If you have the funds available, the options are endless.
When you build instead of buy, you only need to pay stamp duty on the land instead of the land and the property (as you do when buying a house). If you’re not eligible as a first home buyer to be exempt from stamp duty costs, buying land to build can end up saving you thousands of dollars.
As a part of the flexibility aspect, since you’re in total control of the finished product, you can choose to make your home as energy efficient as you’d like. Whether this is by choosing LED lightbulbs, double glazing your windows to block out noise and reduce heat pentation, or installing solar panels and a solar hot water system. Making your home green can be expensive upfront, but save you money on electricity and gas bills over the long term, plus at loans.com.au we offer a home loan discount if you opt to buy or build a ‘green’ energy efficient home.
Building brand new and renting out your home can be a good way to invest. This is because capital depreciation on a new home can be inviting, as deductions are usually much higher than existing properties.
Another option would be buying a decently large block and subdividing, which could give you the opportunity to build more than one home, or building on your block in a way that allows for future building opportunities. However, each council has its own rules on subdivision, and it can be quite expensive.
As well as benefits, there are also drawbacks that should be considered before building a brand new home.
Buying an existing home means that you can generally move in as quickly as the month of buying the home. Unfortunately, when you choose to build, it’s going to take a lot longer than this. On average, it can take up to six months to build a brand new house. Though it can be as little as four months or potentially more than a year. If you’re looking to move quickly, building brand new can be challenging.
As well as the costs to build, you need to find and buy land to build upon. This can take time in itself, stretching out the already long process of building. It’s also another cost to add into the mix.
There are risks involved in building brand new, which can delay the building process and cost you money in doing so. For example, if it storms for weeks on end and the builders aren’t able to get to work, this can end up costing you both time and money.
On the flip side, there are notable benefits to buying an existing home.
Unlike the steps involved in building, buying an existing home can be pretty easy. Online real estate sites make it easy to find what you’re looking for - including the ability to search by price, location, bedrooms, carparks, and more. Though it can still take some time after you inspect and sort out your finances, it’s typically a much simpler process than building brand new.
As mentioned, online sites allow you to search by location, meaning you can find the home you’re looking for exactly situated where you want to live. From generic searches of a particular region all the way down to individual suburbs - you can be as specific or broad as you’d like in where you want to live.
When you buy, you know exactly what you’re getting. However, when you build, it is somewhat up in the air what the home will look like in the end (though you will have a pretty good idea). There is the possibility that things can go wrong with a new build, but when buying, you have already seen the finished product.
Building a brand new house can take months, whereas buying an existing build is much faster. Once you’ve found it online and inspected, you could choose to settle within 45 days from the contract date. Rather than six months for a new build, you can be moved in within just a month or two if you choose to.
Again, there are cons of buying an existing property that should also be weighed up.
Though more convenient and less uncertain about the end product, buying an existing property means you don’t have the same say in the design of the house. Because it has already been built, you can’t choose to make customisations to suit your lifestyle or preferences. While you can renovate or make alterations once you own the home, this can be costly and time consuming.
Since it’s not brand new, it has already been lived in by someone else. This could leave you subject to fixing general wear and tear, like old paint or piping, or even higher electricity bills due to poor insulation and less energy-efficient options.
Buying means that you will be paying for both the land and the property sitting on the land. This will inevitably mean higher stamp duty costs, which can end up costing thousands of dollars more than just buying the land.
A lot of the time, without money being factored into the equation, the choice of whether to build or buy will come down to your own personal preferences. Do you want your home to be designed to suit your specific needs, and to know that no one has lived in the property before? You might be better off building a brand new property. But if you want to move quickly, and you don’t want the hassle of being in charge of the design of the property, you might be better off buying.
Before building, you might like to consider whether:
You have the financial capability to do it
You’re going to be financially stable after the build
You have the time to plan and manage the project
There are any building restrictions or council restrictions that might impact the build
Before buying, you might like to consider whether:
You understand the process of buying (contracts, deposit amounts, conveyancing and legal fees, etc.)
You’re happy with the location of the property
You have space for children if you plan on having them in the future
You understand the maintenance that might be required
If you’re still not sure whether to build or buy, here are some of our most frequently asked questions about building vs buying.
It’s generally cheaper to do what is known as a ‘knock down rebuild’ per square metre than renovating an existing house or building an extension. If you already love your location, but you’re looking for a home more in touch with your needs, considering a knockdown rebuild might be a good option.
Buying a property off the plan means you’re buying a property that is planned to be built, before it’s built. This usually means the purchase price will be less, as developers may lower prices early on in the project to fund the build. Typically, you’ll only need to pay an initial deposit to secure the property, and the balance will be paid upon building completion.
As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.