The world of real estate is defined by many ‘either-or’ questions: Should I fix my home loan rate or leave it floating? Should I buy an apartment or a detached house? Is it better to invest first or become an owner occupier?
Among these questions is the all-important ‘buying old vs building new’ debate. While your ultimate decision is going to depend on your particular needs, wants and circumstances, each option has pros and cons that may help tilt your decision one way or another. Let’s have a look at how they match up.
Government support — Advantage: Building a house
All of the state governments provide various types of support for first home buyers. These are all directed at either brand new homes, properties to be constructed or vacant land however. For instance, the New South Wales First Home-New Home scheme offers stamp duty exemptions on new homes that are worth up to $550,000, and concessions for those valued between that and $650,000. They also have a full exemption on vacant land worth up to $350,000.
Meanwhile, all of the states provide grants generally ranging from $10,000-$15,000 for first home buyers buying a new home. For those looking at the figures on a home loan calculator with trepidation, this can be a useful financial boost. In this area, buying a new home wins out.
Speed — Advantage: Buying old
If you’re an owner-occupier, when you purchase a new home, you want to move in as quickly as possible. While you might be able to get some useful discounts on the price of a new home, you’ll have to wait for a significant amount of time before you can live in it. According to the Australian Housing and Urban Research Institute, in 2010 , new homes were taking an average of 7.5 months to build.
By contrast, after settlement — and once the cooling-off period has been observed — you can feel free to move into an established home straight away.
Customisation — Advantage: Building a house
With a pre-occupied home, short of an astronomically expensive renovation that will push your savings account to the limit, it’s not going to change. It may have been designed for different owners — and for a different time — but you won’t be able to do a whole lot to make it fit your needs.
A house and land package, however, affords you the opportunity to design a home perfectly suited to who you are. This is a practical matter, too. As Madeline McErlain, marketing manager of 4Land Property Group points out, up-to-date technology like energy efficient appliances and modern cabling can be costly and difficult to install in old houses. It will also save you money down the line.
Extraneous costs — Advantage: Building a house
Both types of purchases have added costs on top of the property itself. If you buy pre-occupied, you’ll have to carry out a building and pest inspection to make sure the home is of a good quality. According to the Queensland government, this will cost you $400-600 for a standard three-bedroom house. On top of this, the house will have suffered wear and tear, and will likely require maintenance somewhere down the line.
Buying a new home also comes with potential costs. Building could be delayed by weather, and if you hire an unreliable builder, the process could both be slower and more expensive than you wished. You’ll also have to pay for an inspection of the property at each building stage. However, these are mostly risks that may not necessarily come to fruition, and new homes can save you money in the long run — you won’t need to pay as much for repairs or maintenance.
Choice of location — Draw
With the scarcity of land in Australia’s capitals, if you want to build new you’re generally going to be looking in more outer areas. For instance, in Sydney, much of the new home building activity has taken place in the city’s western regions — 100,000 new homes between 2011 and 2014, according to the NSW government. This is because available land in areas closer to the centre of the city has largely depleted across the capitals.
While in theory that means you’ll have a larger amount of choice with an established home, this may not necessarily be the case. The other reason buyers look to outer areas is because of their lower price entry point. Buyers may find that established homes in more convenient areas are out of their price range, narrowing their options anyway. This may not be the case across the board though — more affordable cities like Brisbane and Adelaide might buck this trend.