Perth is considered an urban sprawl city due to its rapid expansion of the geographic extent, low-density residential housing, single-use zoning and a heavy reliance on privatised vehicles for transportation.
Whether you’re a first home buyer, downsizer, empty nester or an investor, building or buying a new home is one of the biggest, if not the biggest, financial investments you’ll ever make.
It is essential that you spend the time researching and shopping for your builder as carefully as you do for your block of land. There is a lot to take into consideration deciding between purchasing an existing house or building your own home. You need to think about the location of where you would like your new home to be, the size of the home and the land it sits on, how much it will cost and what details of the home matter to you.
To build or to buy?
Deciding between buying an existing home and building comes down to your personal preference, circumstances and financial restrictions. But the very first thing you should do is find out what type of property best suits your short and long term goals.
A common question when it comes to buying vs building is ‘Is it cheaper to build or buy an existing home?’ Now this is a tricky question to answer, and it all depends on whether:
- You go for the cheap builder and products or if you choose something more premium
- Your flexibility with location
- Renovations you would like to make on an existing home; and
- How long you are planning on staying in either home, just to name a few factors.
To try and help Perth home buyers with this question we explore both building a new home and buying an existing property and the pros and cons associated with each option.
Building a home
The Urban Development Institute of Australia’s (UDIA) annual State of the Land report for 2020 revealed the median price and lot sizes across the country. While building a home doesn’t require you to pay stamp duty on the building itself, it is required on a lot of land, which, as evidenced in the table below, can be extremely costly.
Source: UDIA, Stamp Duty Calculator Australia
While it’s relatively easy to find the cost of a lot of land, the exact cost of building a home can vary massively, due to the points mentioned above. When making the decision you should always seek professional advice and speak to a credit provider about the various home loan options available to you and your circumstances.
Advantages of building
- You choose everything, from the floor plan to the finishes
- You could save by not having to pay stamp duty
- It might be a good way to invest
- Less maintenance because it’s a newly built house which equals more leisure time
- Construction loans are designed to help you build
Disadvantages of building a home
- Time – While buying a home means you can move in upon completion of finance and paperwork, building a home could take anywhere from six months to a year, or even longer. Especially in the current market conditions where there is a shortage in skilled workers to take on the influx of construction work.
- Construction loans – Although construction loans are great for when you are building a home, when compared with normal home loans, they have a number of downsides. Most notably, they typically have higher interest rates, which could cost you more over the life of your loan.
- Factors out of your control – Delays could also come as a result of poor workmanship, equipment failures, labour shortages and council approvals.
Buying an established home
When buying an established home you can find out the upfront costs. Firstly you know how much the property itself costs, from there you can work out the stamp duty and potentially even ask the previous owners what their energy bills, such as electricity and gas, costs. When adding up the total costs make sure you don’t miss any of the hidden costs of buying a house.
Pros of buying an existing house
- Convenience – Finding a home to buy can be as easy as going online and scrolling through properties as if you were looking for an interesting YouTube video to watch. Although the housing market is quite competitive so you need to be on the ball.
- Location – Buying an established house means you can choose your desired location with ease, without being restricted by the size or type of property.
- Lower financing costs – While a 20% deposit is typically favoured, many lenders will allow you to borrow up to 95% of the property’s value (provided you pay Lenders Mortgage Insurance).
- You know what you’re getting – When buying an established home you know exactly what you’re getting, especially if you have an inspector look at the place prior to purchase (which is a must).
Cons of buying an established home
- Wear and tear – Buying an established property means someone else will have lived in it. That will mean some degree of wear and tear which you’ll bear the brunt of.
- Higher Government fees – As seen above, stamp duty can cost you tens of thousands more when buying a home over building one. Furthermore, if you’re a first home buyer, state governments are less likely to help you with the purchase of an established home.
- Unavailable features – While features such as a bowling alley will obviously not be readily available, features like a pool or two-car garage may be hard to find in your desired location.
Things to think about
Careful planning is crucial to help minimise the risks. It’s important to consider all your options, do your research and even seek out professional and financial advice before making a decision.
When buying property you must consider all options. Often building a new home is overlooked because it is considered too long and too hard to facilitate or because the client wants a quick solution. If you were to look where the mass of the market goes, it typically leans well towards buying an established property! But, if you were to look at where the most profit is made it tends to be from buyers who build their own home or develop a property.
Established does in some cases offer closer and better suburbs to CBDs or amenities, but building in these same established suburbs will set a higher standard of resale and easier living. The home you select will decide how you live on a day to day basis. If you have a choice, you should always select a home that offers easier, more functional living for you.
Do you require a building inspection?
Have you just purchased a new home or are thinking of buying soon? At SURE Building and Pest we have a range of inspection options for those buying or building a house. From pest inspections to combined inspections and slab inspections to practical completions inspections, we have you covered!
We pride ourselves on providing the highest quality property inspection services to Perth homeowners and look forward to the opportunity to assist you. Call us on 0423 342 362 or click ‘Book now’ in the top right corner and follow the steps.