When it comes to home ownership, the question of buying land & building vs. purchasing an existing property is a hot topic.
It is no secret that within Victoria, if you want to live in and around the CBD you will likely be purchasing an existing property and that is that. However, if you are willing to look a little further out to the north, west, east and even to some extents south there are a range of options in terms of vacant land, which would allow you to build your own home.
When it comes to the pros and cons of each situation, we will attempt to give you a brief rundown on how to make the best decision to suit your needs.
- You know what you are getting
Purchasing an existing home, you get an understanding of how old the house is, what it previously sold for and you can walk around the finished product to see if you like what you see.
- Closer proximity to where you want to be
Looking for close to the city living, new builds are not going to happen unless you buy an existing home, knock it down and rebuild on the newly created vacant block at great expense.
- Faster process
Purchasing an existing home is a matter of finding the place, looking it over, making an offer, arranging build/pest inspections, finance, contracts, move in. It can sometimes take under 45 days. For a new build, they can take between 3 to 6 months!
- It could be more expensive
There is no question that building a home is cheaper than purchasing the same home, in the same spot that is completed – unless a GFC or similar event hits of course. It is far more expensive in general to purchase an existing property than build a new one.
- You may not get exactly what you want
3 bedroom, 2 bath and a study may become 3 bedroom + 1 bath in the location you want. You may need to sacrifice getting exactly what you are looking for, to ensure you get the location & price you can afford in an existing property.
Building a house
- Pay only stamp duty on the land
With an existing build, you pay on the total purchase price; in the current market this could save you a considerable amount of money.
- Get exactly what you want
In a new build you can customise, pick your taps, sinks, carpet – you name it. You can make the home your own in the build process
- Should be cheaper
Building a new home should make the process cheaper compared with purchasing an existing property. This should allow you to make significant returns on your investment from the time you move in.
- Time of building
To build a home including going through council and getting approvals can take between 3 to 12+ months, so you need to be prepared for this and if you are building within an area that has lots of conditions from the local council, you may need to jump through a few ‘hoops’.
- Cost blowouts
There are ‘inclusions’ in a build and then there are extras or variations, if you want a finished home, landscaped with a pool, you will find that your home builders will leave you with a little bit to be desired.
Anything ‘extra’ comes at a cost, so read the fine print, especially of spec home builders who can be notorious for not including basic amenities – such as a driveway or letterbox.
- Progress payments
As the build progresses, your bank will require you to pay more. Right up to a month or two before you finish, you will be paying a mortgage on about 80% of your total property cost. This as well as renting somewhere else and potential cost blowouts could make a big impact on your standard of living and should be taken into account.
- Additional paperwork
The banks always want more information and paperwork with new builds, so be prepared.
The key with purchasing a new or existing home is understanding all the facts, understanding what you are looking for, where you are looking for it an purchasing a home within your means.
Speaking with a legal professional with experience in conveyancing and property law is a great start to getting the right information and understanding what could happen if you don’t do everything by the book.
Get in touch with the McClure Law team today to make sure you get the best start to your new property ownership.