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First Home Owners: Build or Buy

First Home Owners: Build or Buy

A must read if you're ready for your first home

Are you ready for your first home?

Home is where you and your loved ones will reside, where you’ll create cherished memories together, and where you’ll all laugh and cry for years to come.

You might have read our previous post, 5 Ways to Increase The Value of Your Home, but if you don’t have a home yet -- you have something else to focus on for now.

Should I build or buy my first home?

Whatever the size or design of a house, everyone remembers the home they grew up in. Buying or building a house is a once in a lifetime investment. 

When investing in a home, there are multiple things to take into consideration such as: 

  • Cost

  • Location

  • Size

  • Budget

  • Design 

  • And maybe the most important, whether the house feels like a home or not.

Both buying or building a house has its own pros and cons, which can make the process a challenge.

In the majority of the major cities in Australia, building a house means living in the suburbs due to the shortage of land area in and around the centre of the city. At the end of the day, the location comes down to every individual’s personal preference.

A lot of people find it more peaceful in the suburbs while others find it more convenient living in the city centre due to the facilities available. 

Whether you’re looking to settle down or invest in the suburbs or in the city, it can be tough to know whether to buy or build.

It’s the great debate of Australian home ownership, and here are the most important things to understand to help you make the right decision for you.

 

Building:

 

  • Pros:

Cost Effective:  When buying their first home, every individual or family has a budget to stick to. The table below gives an estimate of the cost difference between buying and building in six of the major cities in Australia:

From the chart above we can conclude that the cost estimate to build a house is cheaper than that of buying. 

Customisable according to personal preferences: Building a house from scratch gives you the opportunity to customise it according to your own preferences and decorate it the way you want. 

From things like the size of rooms, to the size of the backyard, double storeyed or single-storeyed, and the number of rooms, building a home provides options. When buying an established house, you will have to be satisfied with what is available and any personal preferences takes a back seat. 

 

  • Cons:

Time: Building a house from scratch is a time-consuming process and according to the Australian Housing and Urban research, usually takes around 7 to 8 months to build. 

Building a house has some financial implications on first-time homeowners as they have to keep paying rent for their accommodation until the house gets to build and on the other hand buying an established house gives the owners the option of moving in right away. 

According to the Australian Housing and Urban Research Institute (AHURI), “It can take up to 7.5 months on average to construct a new home. This is nearly double the time it took in 2000. This is due to the increased size and complexity of house designs, and a current skills shortage in the building industry.” 

Cost is not fixed: The architect always comes up with a cost estimate before the construction starts but the concern with this cost is that they are not fixed. 

There are always unavoidable delays during construction due to weather, labour strikes or shortage of raw materials. The cost could also vary due to a sudden increase in the price of raw materials.

 

Buying:

 

  • Pros:

 

Convenience: One of the major reasons why first-time homeowners prefer buying a house rather than building is the convenience that comes with it. 

After the house hunt is over and you have found the house of your liking, all you have to do is get a loan, buy and move in. Buying a house helps you avoid the long, often time-consuming process of building and all the other inconveniences that come with it.

There are means of a home loan from companies offering the service. You can go to a mortgage broker in order to get quotes on a new home, with a range of home loan options available to suit your needs and budget.

According to the home loan firm, Credit Capital, “Loans for land lots typically come with higher deposit requirements and higher interest rates, as these are seen as riskier propositions than traditional home loans. Because of this, buying a home can end up being a more cost-effective option than many people realise when everything is considered.”

Location: The biggest advantage of buying a house is the large choice you get regarding the location, given that empty lots are tough to come by in the city. 

Every homeowner would want their house to be in a nice neighbourhood with good schools, hospitals and local services. This luxury of location is typically only available when buying an established home due to the shortage of free land area.

 

  • Cons

 

Can be expensive: As shown in the chart above buying a home turns out to be more expensive in Australia than building a new one from scratch. 

This can add up to hundreds of thousands of dollars in the long-run, and place considerable pressure on couples and families who are looking to own their own piece of property.

That’s not even mentioning finding the 20% deposit to buy your home.

Sustainability and Technology: Buying a home means that the house would be technologically and environmentally set. The advancement in technology has had rather big implications on whether to buy or build, with the changing nature of tech and sustainability meaning some older properties don’t measure up to modern standards. 

This influences purchasing behaviour according to the home loan experts at Empowered Finance who say “the availability of sustainable living arrangements in 2019 can have a direct impact on the desire to move ahead with a major investment like property. Buyers are increasingly savvy and concerned about their eco footprint and expect modern living arrangements to reflect this.”

When one makes an investment as big as a home, everyone wants it to be technologically advanced and have all the possible technological features. Buying an established house takes away this aspect. Even though these things are easy to add after buying, they cost a lot of money and add on to the cost of buying the house. 

 

Are you ready to buy or build?

 

The decision of whether to build or buy is not an easy one and comes down to a range of personal, financial and social factors. 

When making this decision keep in mind your financial situation, choices and preferences, long-term plans, job security and ability to pay back the money borrowed.

And if you’re having trouble with your credit score, check out our post, How to Take Control of Your Credit Score.

While building a new home gives you a cost-effective, affordable, and empty canvas to play with, it does take longer to bring your vision to life and may limit you in terms of the available lots of land.

On the other hand, buying a new home is instant, and gives you access to prime living locations, but at a higher price and without the same level of customization.

Ultimately, the choice to buy or build comes down to you and the life you picture when you close your eyes.

So, what does your dream home look like, is it bought or is it built?

 

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