The home-buying experience comes loaded with many decisions you’ll have to make.
Where will you buy? What sort of neighbourhood do you want to live in? What sort of house do you want? How will you finance your purchase?
One of the initial big questions you’ll likely find yourself asking is whether to buy an existing house or build your own. Both come with benefits and drawbacks that you’ll need to consider.
Why do people build new homes?
Building your own home is a popular choice because the experience involves creating a home that is completely customisable to your preferences. You can choose the layout, fixtures and finishes, making your home your own. Building new also means you don’t have to deal with issues older houses might have, like plumbing or electrical issues, and you don’t have to worry about renovations or repairs as you move in.
On the downside, the process of building a new home can be quite time-consuming and often feels overwhelming for some home buyers.
Why do people buy pre-existing homes?
One of the benefits of buying a pre-existing home is the convenience it brings. While there are still processes and hoops to jump through, the basics involve finance approval, signing the contract, settling, and moving in. Buying a pre-existing home also generally comes with more options in location. If you want to live in a CBD area or specific region, sometimes land options are sparse, if at all available. If you have your heart set on moving to an area with limited land options, building may not even be an option.
Setbacks to buying a pre-existing home centre around the lack of flexibility that new home builders get. You don’t get to customise your home and may have to spend more on renovations and repairs to get what you want.
Talking dollars and cents – which one is best?
While these pros and cons must be weighed, several financial factors can determine which option is right for you and your budget. This is where building a new home often comes out on top and can become a more financially viable choice.
Customisation
The customisability of a new home can save you money in various ways. Firstly, there are a lot more costs and options that you can shop around for to save you money. Rather than negotiating a single price for a pre-existing home, you can negotiate savings on your land AND with your builder. This gives you a large opportunity for savings and price reductions, and you can build specifically to your budget, choosing where to splurge and where to save.
Furthermore, building new means getting what you want from day dot. Rather than moving into a home, you will one day want to repaint, floor or renovate, you’ll be moving into your ideal home immediately. This has the potential to continue to save you money in the future.
New Home Warranty
The ‘newness’ of your build will also save you money in a few ways. Firstly, you will avoid numerous issues older houses may have, whether replacing fittings, fixing paint jobs, plumbing and electrical issues that come with age. A new house is a fresh start, which additionally means it comes with New Home Warranty. When building a new home, your contractor must take out new home warranty insurance on your behalf. This covers your new home for 6 years and 6 months for any building defects that might surface in that time. It will also cover you during the building process if your contractor goes bankrupt or into liquidation or loses their license.
Stamp Duty
When looking at stamp duty alone, building your home will save you thousands. When you buy a pre-existing home, you pay stamp duty for the entire purchase price of the home, whereas if you are buying land and building a house, you only pay stamp duty on the land sale price. In some areas of Sydney, for example, the median land price is $460,000, which equates to roughly $16,000 in stamp duty. An established property on a similar block of land has a median price of $890,000, equating to approximately $35,000 in stamp duty. This means building new would immediately save you more than 50% in stamp duty and, in this instance, $19,000.
Government Grants and Exemptions
Building a new home often has the additional benefit of various government grants and exemptions, especially if you are a first home buyer. In NSW, there have been, and continue to be, grants for building a new home, including the first home owner grant, exemptions and savings on stamp duty and transfer duty, and the federal HomeBuilder grant.
Overall, building your home and buying a pre-existing home has clear pros and cons. It is clear, however, that there is an increased opportunity to save money and often greater financial viability in building a new home.
If you are considering building your next home in the Hunter Valley or Newcastle regions, contact us to find out how we can help design and build you the home of your dreams.