Introduction:
Is it better to build or buy a house in Australia?
When entering the real estate market, homebuyers often find themselves torn between purchasing an established home or embarking on the journey of building their dream home from scratch. Each option comes with its own set of advantages and disadvantages, and making the decision ultimately boils down to personal preferences, budget considerations, and individual needs. An established home is one that has already been inhabited and may have undergone multiple ownership changes over the years. On the other hand, opting for a brand-new home or constructing one from the ground up ensures that you will be the first to reside in your own tailored sanctuary.
Additionally, within this blog post, we will conduct a thorough comparison between purchasing a pre-existing home and purchasing a newly constructed property, aiming to assist you in making an informed decision for your upcoming real estate investment.
Purchasing a house and land bundle vs. purchasing off the plan:
Purchasing off the plan and buying a house and land package share similarities in the process, as they both cater to individuals seeking ownership of a newly constructed property. However, the crucial distinction lies in the aspect of ownership.
When it comes to a house and land package, you gain ownership of the land from the start and proceed to construct the house over time. On the other hand, when purchasing an off-the-plan property, ownership is not obtained until the construction is completed and the settlement occurs.
Diving deeper into each approach, let’s gain a comprehensive understanding: What does purchasing ‘off the plan’ entail? Buying off the plan involves acquiring a property before its construction, relying on detailed construction and design plans provided in an advertisement. While there may be a display home to view, artist impressions depict the expected appearance of the completed property. After purchasing off the plan, there may be a waiting period before physical occupancy, during which property values may appreciate, potentially resulting in financial savings by securing the property earlier. However, it’s important to consider the associated risks:
Complicated contracts:
- It’s advisable to have a legal expert review the contract for any potential issues.
Disappointing results:
- While uncommon, the final home may differ from your expectations due to developers’ flexibility in making certain changes.
Limited design flexibility:
- Depending on the developer and contract, there may be limitations on making bespoke design choices.
When buying off the plan, a single contract is signed for the house and land package. A deposit of around 10% is paid, and the settlement occurs after construction, generally with a home loan.
What is a house and land package? A house and land package combines a home and land loan into a single package, often providing affordability. Essentially, you purchase a block of land and arrange the construction of a home through two separate contracts. The land is sold by one entity, while the home is purchased from a builder.
With a house and land package, you know the total price of the land and home upfront, minimizing concerns about unexpected costs. The mortgage is initially calculated based on the land value, followed by a second loan (construction loan). Payments to the builder are made in the typical six stages as the construction progresses.
Before purchasing a house and land package, consider the following risks:
- Know the inclusions and exclusions: Understand what is included in the package and what additional costs may arise. For example, landscaping and fencing are often not included, while a complete kitchen and electrical points are typically included.
- Long process: Constructing a home can take a significant amount of time, and delays may occur, which can be challenging if you are renting or residing elsewhere temporarily.
- Negotiating: Engaging in design discussions with the builder can be an exhausting, expensive, and potentially confusing process. It’s essential to have a clear understanding of your requirements and ensure the builder can meet them before signing the contract.
Pros and cons of buying a new build property:
| Pros | Cons |
| Modern features and appliances | Newly constructed homes often tend to be situated on the outskirts of cities and towns. As a consequence, this can lead to limited presence of established communities, sparse tree coverage, inadequate public transportation options, lengthy commuting distances, and other associated challenges. |
| greater opportunity for customization, especially when you are involved in the design process of a new property rather than simply purchasing off the plan. This allows you to personalize various aspects of the home according to your preferences and create a living space that truly reflects your unique style and needs. | Building in an established area through a knock-down rebuild can be costlier than purchasing an empty land plot. |
| New apartments can be found all over cities, giving you decent choice with your location | Constructing a new home can be a time-consuming process that often entails significant stress and pressure. |
| Newly constructed apartments are available throughout various locations within cities, providing you with a wide range of options and choices regarding the desired location for your residence. | Building a home can incur unforeseen costs and delays if there are interruptions to your cash flow or unexpected circumstances arise. |
| Different home buyer schemes offer incentives to encourage individuals to either build or purchase a newly constructed home. | Visualizing a house that has not yet been built can pose a significant challenge. |
| When constructing your own home, the combined cost of the land and the building itself can often be lower compared to purchasing an already established property. | – |
Pros and cons of buying an established property
| Pros | Cons |
Buying an established property typically offers a faster and easier process, providing certainty about what you’re getting. | Fewer customization options are available when purchasing an established property, but renovations can be pursued with adequate funding. |
| If your preference is to reside in a relatively central location, purchasing an existing home would typically be your primary choice. | outdated house |
| Established houses are often situated in well-established areas, providing a greater opportunity to experience and familiarize yourself with the existing community before making the decision to move in | Numerous established houses may necessitate updates and modernization, which can potentially incur significant expenses. |
| Certain buyers may place greater trust in the structural integrity and overall quality of established homes. | Hidden issues can arise, especially during renovation projects. It is essential to arrange a comprehensive property and pest inspection before purchasing any property to identify and address potential concerns. |
| There is an opportunity to acquire a heritage home with unique character when opting to purchase an established property. | – |
