Last Updated: 27th September, 2022

When home buyers enter the housing market, many find themselves in a dilemma: Should they buy an established home or build a dream home from scratch? And is it really cheaper to build than buy? Buying an established home may seem like the quickest and easiest way, but there are many advantages to building a brand new home that are worth the time and effort.

Why Should I Buy An Existing Home?

The biggest reason to buy an established or existing home is convenience. Once you sign the papers, you can move into the house immediately.

What are the pros of buying a home?

  • Location: Vacant building spots are limited and drying up in the city and regional areas. As the demand for property is increasing, it is easier to find an existing/established property in your desired suburb or neighbourhood.
  • Convenience: Searching for property can be as easy as scrolling through real-estate websites for listings or going through videos. You can take the help of a buyer’s agent to find a home that meets your needs. Since the property is already established, you move in straight away, which is great if you’re relocating for a new job or your kids are starting school.
  • You get what you see: As the property is already built, you don’t have to visualise what the final home will look like.
  • Lower risk: You can get a better estimate of the value of an existing home than on a new build. Since comparable sales figures are available, you know just how much your home is worth.

What are the cons of buying a home?

  • Limited features: You have a list of essentials and must-haves for your dream home, but an existing property probably won’t have them all. You’ll either have to forgo some features you want or renovate to add them, which increases the cost.
  • Higher stamp duty: The stamp duty to buy an existing home is usually higher than for building one. When you buy an existing house, you pay stamp duty on the price of the whole house. If you build, stamp duty is applicable only on the price of the land.
  • Wear and tear: If you are buying a property someone has lived in, the home will have gone through wear and tear and deteriorated over the years. This ratchets up your maintenance costs. Older homes usually do not have energy-efficient systems either.
  • First home buyer benefits: In most states and territories in Australia, first home buyer benefits, like grants and discounts are available for new homes and not older homes.

Buying A New Home Vs Buying An Existing Home

An established or older home is one that has been lived in, and it might have changed owners over time. A brand new home is newly built, so you are the first ones to reside in it. There are pros and cons to buying a new home and an older home. Overall, older properties usually have higher valuations than new homes.
What are the benefits of buying a new home? What are the benefits of buying an older home?
First home buyer grants and schemes are available for new homes Older homes are in established suburbs or neighbourhoods, closer to amenities
Maintenance costs are lower than for older homes; newer homes are equipped with modern, energy-efficient appliances Older homes tend to maintain their value better than new homes. You can even do some cosmetic renovation to maintain or improve the value of the home

Why Should I Build A Home?

Building your own home is a great way to get the home you want. You can customise to make everything just the way you want it.

What Are The Pros Of Building A Home?

  • Personalisation: From the land to build on and the number of rooms, right down to the colours of the tiles and walls, building your own home allows you to customise nearly everything.
  • First home buyer benefits: Grants and schemes like the First Home Owner Grant and the First Home Loan Deposit scheme are available for building a new home. Another added advantage is that stamp duty might be lower for buying land than for buying an existing house.
  • Energy-efficiency: Older homes usually do not have great insulation. With a new build, you can opt to use energy-efficient materials and appliances. Over time, you save thousands of dollars on energy bills.
  • Less competition: Fewer people are trying to buy vacant lots than existing homes.

What Are The Cons Of Building A Home?

  • Location: Unfortunately, it is difficult to find vacant land near city centres. Most of it is on the outskirts of cities or in areas, which is not favourable if you need to be near amenities.
  • Time: Building a home takes time –and a lot of it! The paperwork and financing can be particularly complicated, too. There are numerous processes necessary to start building: clearing the building site, engaging the services of a builder, laying a foundation, etc.
  • A construction schedule outside your control: While the builder will have a timeframe for completing the project, expect some delays due to weather, labour shortages or the unavailability of materials. This further lengthens the time for the home to be complete.
  • Quality control difficulties: The final build might not be up to standards or might not be quite what you imagined. You might have to use subpar materials or make other compromises to complete the build on time.

House And Land Package Vs Off The Plan

With an off-the-plan purchase, you sign the contract for house and land, and pay the deposit upfront; settlement is done once construction is complete. You learn the price you’re paying only after construction is done. The settlement date is usually one to two years after you make the deposit but a lender will not approve a mortgage until completion is less than three months away. On the other hand, a house and land package combines a home loan and land loan into one. You purchase the land first and then begin construction. Even though it’s one single process, you are signing two different contracts. You know the price of the land and the cost of the build from the start.

Is It Better To Buy Or Build?

Now let’s look at how buying and building compare, based on several key considerations.
Factor Buying Building
Location Usually in an established area with amenities and infrastructure Usually in the outer suburbs, where more vacant land is available
Costs In preferred locations, the entry costs of buying a home can be expensive Besides the price of land, you need to budget for costs involved in clearing the site
Loans There are various options and lenders for home loans, with competitive interest rates Construction loans might not have competitive interest rates and not all lenders offer them
Stamp duty Stamp duty concessions or exemptions are available when buying a new home, not for older homes Stamp duty is applicable on the land only. So first home buyers can save on stamp duty by building
Grants available The First Home Owner Grant is available for new homes The First Home Owner Grant is available for new builds
Time House hunting can take 4-6 months, then settlement takes up to 120 days It can take 6-12 months to complete the build
Sustainability Older existing homes might not be energy efficient You can choose to build an energy-efficient home
Customisation Renovation is possible but it will add to the costs You have complete creative freedom to build the house you want
Appreciation With older homes, you can compare sales and analyse the trends. With new builds, it’s more of a gamble. Comparable sales might not be extensive, making it harder to arrive at informed decisions about the actual value of the property. You might end up paying an inflated price for a home that’s worth far less.

Is It Cheaper To Build Or Buy A Home?

There are so many variable factors to consider to know if building a house or buying is the right choice for you. Remember, there is a difference between buying a new home and buying an old one.If you buy an established home, you do not get first home buyer benefits or stamp duty concessions and it also comes with higher maintenance costs than new homes. On the other hand, if you decide to build a home, you have to factor in the costs of clearing the site, landscaping, soil tests, etc. Also, unexpected costs can arise during site preparation that are not covered in your building contract. The budget you have will restrict what you want to install and you might not get the fixtures and fittings you had planned. With newly released vacant land lots, land registration takes time, which extends the timeframe for purchase settlement and eventually the build. It could take a year or two for the completion of the home. In the meantime, continue to pay your rent which is dead money; if your rent is $450 a week, this is an annual total of $23,400. Over two years, it’s $46,800. Costs are just one of the many factors to consider when deciding whether to buy or build, however, as you need to assess your present and future needs. While an established home gives you convenience, building a house gives you the advantage of personalisation. With passive designs and the use of better building materials and energy-efficient systems, you can save on energy bills. It may come down to your preferred location and the must-haves of your perfect home. If you can make a few compromises on features and need a good location near the city, an established property might be a safer bet. If you already own land and have a reliable builder, you may do well building your dream home.
If you’ve made the decision to build or buy your home, our mortgage brokers can help to find the right mortgage to finance your dream. Call us on 1300 889 743 or complete our free assessment form.