To buy or to build? It’s the question most people in the housing market consider at some point, and a complicated one at that.
The pandemic shook up both the housing market, and construction industry drastically. We saw home values skyrocket, building material costs increase, and wait times stretch out.
Now more than ever, it's important to carefully consider the current state of the housing market and construction industry when making the choice to build or buy, as things are evolving quickly.
Building a brand new home
Building a home is an attractive option because it means you can completely customise it to suit your family’s needs.
You can decide the layout, storage solutions, materials used, overall aesthetic, in-built features and important finishes. You also get to choose the block of land and location. It sounds like a no-brainer.
But with the issues plaguing the building industry, including supply shortages and wait times to procure said supplies, it’s worth considering if your heart and mind can see out the process, especially if it does blow out.
Some punters relish in the prospect of being able to somewhat control the amount of dollars they spend on their home, which is entirely possible, but the current inflationary and supply pressures must be considered.
Core Logic’s Cordell Construction Cost Index for the first quarter of this year, showed that residential construction costs nation-wide had increased by nine percent spanning the twelve months back to March 2021.
It takes out the record for the highest annual growth, with the exception of the year 2000, when GST was introduced.
“Timber costs continue to rise, with cladding, decking and other timber items affected. Steep rises in metal prices are also now flowing through to the market, with structural steel, fixings and metal components hit hard,” said CoreLogic construction cost estimation manager, John Bennett.
“We continued to see volatility in the rest of the market, with imported products the most vulnerable due to elevated shipping costs. Rising fuel costs are also on the radar and we have continued to see further increases in the cost of other materials,” said Mr Bennett.
Construction costs have increased, but so too has the cost of an existing home, in both sales and rentals. Rental prices have grown by 2.6% over the March quarter, according to CoreLogic’s Quarterly Rental Review. Weekly rent expenses for those waiting on homes to be built could mean a double whammy of housing costs.
Some might be in better positions to build than others, with cost-effective accommodation to keep finances comfortable in the meantime.
Buying an established home
Buying an existing home might mean less potential to customise it, but more convenience and an easier, quicker process.
In general, property settlement periods range from 30 to 90 days, after which you can move straight in and enjoy your new home.
Transparency in pricing is also a key benefit in purchasing an existing home, as there is no risk of unexpected costs at the end of settlement. It’s easy to determine whether you’re paying a fair price too, simply by researching the surrounding area and recent sales figures for similar properties.
For those who prioritise a central location in an established area, buying an existing home might be the only option. Lack of available land means new builds are rare in central locations. If this is the case, a cosmetic or major renovation can bring your new, established home up to scratch and give you the modern look you desire, in a location of convenience.
Existing homes also come with landscaping, unlike most new builds which require purchasers to pay additional fees for backyards, gardens and entertaining areas
There are, however, costs associated with building repairs and updates to consider when purchasing an established home, especially as homeowners have to foot the bill as soon as the works are completed, which is often detrimental to household cash flow.
It’s a matter of individual priorities; is a brand-new, customised home worth potentially long waiting periods, and an uncertain end cost due to supply chain issues? Or do you value convenience, a central location and low-risk purchase? With supply issues set to continue for the foreseeable future, it’s worth understanding what end result you are looking for.
“Considering the record number of houses approved for construction during the HomeBuilder grant along with additional rebuild and repair work from the recent floods, demand for construction materials is likely to remain high,” said CoreLogic research director, Tim Lawless.
“At the same time, supply side challenges persist. A shortage of key materials such as structural timbers and metal products along with higher fuel costs, and labour shortages, is likely to keep upwards pressure on building costs for some time yet.”