When it comes to creating your dream home, you typically have two options: build or renovate, or find an existing home that ticks all the boxes. So is buying or building right for you?
Trying to find – and buy – a home you love can be a tiring and potentially expensive process. It’s why many people choose to build a home from scratch, knock-down and rebuild, or significantly renovate an existing home so it meets their needs. However, both buying and building have plenty of pluses and pitfalls.
To work out which option is right for you, there are a few things to consider:
How long does it take to move in if you buy or build?
If you’re considering building or renovating, one of the most important things you’ll need to think about is how long it will take.
While buying an established home can take as little as 30 days from signing the conditional contract to the date of settlement, renovating or building will take much longer. According to the Australian Housing and Urban Research Institute (AHURI), building a house can take many months – about 7.5 on average.
If you’re knocking down and rebuilding, or if you’re thinking about renovating, you’ll also need to consider how quickly, and easily, your local council will approve your plans.
Dave and Alice Stephens*, for instance, recently renovated a five-bedroom home on Sydney’s North Shore. They were fortunate to have already been living in the property for 13 years, and loved the area. However, the planning process took several years, and the actual build – which is still in progress – has already taken 12 months.
“The planning took a long time. Once we selected a builder, got funding and secured our construction certificate, it took us about six months to complete the interior renovation. It will take a couple more to finish the pool and outdoor area,” he said.
“Our plans spent almost a year in council and we didn’t receive a whole lot of feedback along the way. This was, without a doubt, the most frustrating part of the overall experience,” Dave added.
Budgeting for renovation and build costs
While you may pay a premium for a pre-renovated and ready-to-move-into property, it’s also important to remember that a renovation or build can often end up costing you more than you think it will. This depends on the scope of your renovations, and where in Australia you are buying or building.
According to data from CoreLogic RP Data, Domain Group and BMT Quantity Surveyors, it’s typically cheaper to build a house from scratch than buy an existing home in Sydney, Melbourne and Adelaide; and cheaper on average to buy an existing home in Brisbane, Perth and Hobart.
Don’t forget that while renovating or rebuilding you may also need to rent elsewhere – the cost of which can add a significant overhead.
Also, according to Canstar, you may, in some instances, need a higher deposit to get a construction loan to build a home from scratch, than if you were buying an existing home.
For the Stephens, securing finance was a very challenging aspect of the renovation process.
“We probably underestimated the importance of preparing for the valuation of a construction loan, and didn’t get it right first time. It was only when we prepared the contract properly and briefed the valuer on exactly what we were trying to achieve, that we got the valuation we needed to fund the loan. The lender was particularly helpful in assisting with this,” said Dave.
Are you eligible for Government build incentives or first home owner grants?
When you choose to build a new home from scratch you may qualify for certain government incentives, depending on where you live and the value of your build.
In NSW, for instance, you receive $5,000 towards a home off-the-plan, or for vacant land on which a new home will be built. Or, if you’re a first home buyer in regional Victoria, you can get a grant of $20,000 when you build a new home (or buy a newly built home). So make sure you check out what grants you may be eligible for before getting started.
What can you expect when buying or building a home?
When you buy an existing home, you have the all-important luxury of knowing what you are getting. You can perform a building inspection and a pest inspection, and enjoy the peace of mind that you’re aware of potential issues before you move in.
According to Canstar, this is a vital benefit. “First, the potential defects of an established home are often visible, or show up in the pre-purchase building inspection to give you a warning about what you’ll face once you move in. You can’t do a pre-purchase building inspection if you build, so you don’t know what problems might be caused down the track a few months by your builder taking a few shortcuts to get the project done on time,” Canstar said.
Is buying or building a home right for you?
When you buy an existing home, you have no control over its initial style, layout and aesthetics. When you build from scratch, or renovate, however, you can completely create the home that you want.
For the Stephens, this was particularly important. “We were happy with the location and the existing part of the house, and we could see its potential. For us, it was being able to design the space we wanted for our large family,” he said.
“With this renovation, we felt totally in control. We obviously had to be mindful of the area and local council limitations, but for the most part, we have been able to do what we wanted,” he added.
What is best – buying or building?
The decision to renovate or build a new home rather than buy an existing dwelling is a very personal one, and requires some careful consideration.
According to the Stephens, the process of renovating an existing home was stressful, but definitely worth it given the end result.
“We’ve had issues along the way which stressed us out, but on the whole it’s been a good experience. We went into it expecting the worst, but in reality, it’s been quite smooth,” said Dave.
If you want to learn more about financing for each option, give your local Aussie Broker a call.
*Not their actual names.