If deciding to become a homeowner isn’t a big enough undertaking, as a home buyer you are faced with the age-old decision of whether it’s best for you to buy an existing property or buy land and build a brand new home.
For many First Home Buyers and home buyers in general, not enough is known about the home building process, resulting in it not even being considered as an option to potential home buyers who then just buy existing. While both alternatives offer significant financial and lifestyle benefits. Ultimately, the answer as to which is the “better” option will depend solely on the priorities and preferences of the buyer (you).
And for one of the most emotionally charged purchases of your life you would want to be sure that the house you move into is right for you as a ‘home’ and as a financial investment. Once you know what your particular needs and wants are you can decide what is classed as “better”.
So, in the interest of curiosity, let’s take a look at both alternatives and the advantages and disadvantages of each.
Buying an existing home
For first home buyers (and all home buyers in fact), the excitement of this milestone is incredible, and you probably can’t wait to start your life in your new home straight away. It’s no secret that buying an established home can be more convenient at the start because once you sign the dotted line you can start planning to move in.
This is where buying an existing home has the biggest advantage, by going his route you will get into your newly purchased home sooner. The process of purchasing an existing house is much simpler and less involved than a new build.
When purchasing an existing home all you need is;
- Loan pre-approval
- Make an offer
- Sign conditional contract
- Your building and related inspections (a crucial step)
In some instances, it can be as quick as 30 -60days from signing the conditional contract to settlement.
As they say in real estate terms, location is key. Established homes tend to be in established neighbourhoods and if being in close proximity to the city or town centre is high on your priority list, an existing home may be the way to go because in general, you can’t find vacant land to build on close to the city (unless you are on the market for a knockdown rebuild).
An existing home may be a better option if you would like to be in a particular established neighbourhood – near work, school, friends and/or family.
Having said that, with an existing home, the likelihood of finding a home in your dream location or the ideal neighbourhood is relatively high, though it is important to remember that along with the perfect location comes a hefty price tag to match.
So, unless you are confident the you have the budget to match you may still end up settling on an existing home that’s a bit further away from the ‘ideal’ than you’d hoped, and for many first home buyer’s this tends to be the reality. For an investor or a buyer who already owns a home this may be more of an advantage of ‘existing home’ versus ‘new build’ as they likely have equity in another property and are at a different (more established) financial position when on the house hunt. For the first home buyer, simply getting a foot into the property market may be a bigger priority than the perfect location. It’s all relative.
- Negotiate on price
Another advantage of buying an existing property is the potential for you to buy at and sometimes below market value. Due to the existing property generally being much older, it won’t be without a few flaws, for this reason, there is potential for you to be in a position to negotiate a better purchase price following your building and related inspections or have the cost of repairs passed on to the seller (provided you have in place a conditional contract).
In order to take advantage of these opportunities to buy a property at a price below market value, you will need to put in the effort – do your research, work with a trusted industry professional and take your time.
- Can create growth with renovation
An established property offers the potential to create further growth in equity, what this means is that if you were to find a property that is a bit run down and just needs a bit ow work (but is in a good location), you can do some cosmetic upgrades or add an extension even – this will almost immediately add value to the property and give instant equity. Again, with many aspects of making an existing property perfect for your specific needs and lifestyle – there is a degree of cost that comes with it that home buyers need to consider and factor into their budget.
The potential is there, no doubt, but few (if any) can afford to take on any renovation work straight away and often leaves home buyers living in a less than ideal home for a while before they can make it their own.
As with any choice in life, there some drawbacks that need to be mentioned. These are not to say that it is a deal breaker buy they do need to weigh up against your specific circumstances to see if this is a suitable home buying option for you and your family.
As I briefly mentioned, there certainly are some significant financial drawbacks to purchasing an existing home. The main contributing factor to potentially spending more than initially planned is simply down to the fact that the property is dated and has been lived in previously. With this comes the likelihood that there will be a need for repairs and even upgrades needed to get the home into a state that you are happy to live in. As with any home buyer whether you are a first home buyer, an investor, or onto your second home – cost is always a deciding factor.
- No FHOG or government incentives
Following on from the issue of cost, purchasing an existing home also means that buyers are not eligible for the First Home Owners Grant (FHOG) – a state government incentive that makes it easier for Australian’s looking to enter the property market – a helping hand. This grant is only available to first time home buyers purchasing a new property or for people who are building their own property (or contracting with a builder to do it on their behalf). The grant varies from state to state, you can read more about it here.
- Hidden costs – Repairs & Maintenance
Not all that glitters is gold, and some buyers have been unpleasantly surprised down the track with just how much work is needed to get their newly purchased existing home to a comfortable (more functional) state. For this reason, it’s important to always keep a level head and try to keep as much of the emotion out of the final decision as possible – don’t rush the biggest purchase decision of your life.
It also pays to do your due diligence when it comes to conducting the appropriate inspections before signing on the dotted line. Buying a home is a huge financial decision so naturally, you’d want to be sure that your investment is structurally sound and conducting professional building and pest inspections is how you can assess this. These inspections will expose costly problems ahead of time and can save you bucket loads of money down the track.
- More Compromise on design/features
An existing home is already there, set for you to move in and start living. But it is just that – already build, to someone else’s tastes and preferences. This is possibly the biggest disadvantage of buying an existing home – you won’t get exactly what you want.
Older homes, tend to be functionally out-dated, no longer meeting the needs of most buyers. Many of which don’t always offer the open plan living that most buyers now look for, or have fewer bathrooms or a small kitchen with cabinets that you don’t like etc. Almost every feature and design element in an existing home will be dated to some degree. Unless you find an existing home that has exactly what you want and is in perfect condition, you will have to spend additional money on renovations, repairs, decorating and/or landscaping.
Helpful hint: These additional expenses should be factored into the overall price, especially when comparing the feasibility of buying existing to the cost of building a new home from scratch.
Building a brand-new home
- You get exactly what you want
A new home is yours, based on your own individuality. It’s like a blank canvas ready to be splashed with colour and built with a purpose, just for you and/or your family. When building a new house (from scratch) you can design that home exactly the way that you want it. This is especially appealing to first home buyers since the new build property is going to be YOUR home. It’s a different situation if you’re purchasing this solely as a new investment, then decisions are based more on a numbers game.
- Access to First Home Owner’s Grant (FHOG) and other incentives
Many first home buyers are drawn to building new due to the access to savings and concessions, such as reduced stamp duty for homes valued under a certain amount and the First Home Owner Grant (FHOG) – A state government incentive that makes it easier for Australian’s looking to enter the property market.
As of 2019, the current value of the FHOG in Queensland properties is $15,000 if you are buying or building a new home up to the value of $750,000. This grant is only available to first time home buyers purchasing a new property or for people who are building their own property (or contracting with a builder to do it on their behalf).
General FHOG eligibility criteria include;
- The home you are buying, or building must be new and valued less than $750,000 (including land).
A new home is a brand new dwelling that has not been previously occupied as a place of residence or sold as a place of residence.
- You must be over 18 years old.
- You must be an Australian citizen, have a permanent visa or be part of a joint first home owners grant application, along with an Australian citizen. In some circumstances, New Zealand nationals with a special category visa may also be eligible.
- You must not have owned a home previously.
- You have not received a first home owners grant previously.
You can read more on the First Home Owner’s Grant here
- No need for repair and/or maintenance
New build homes are built to meet current building standards, are more energy efficient and is built with the latest technology. Having everything being brand new and to current standards means that you won’t need to fork out any extra money to carry out repair work and upgrades like you would in an existing home. Not having to deal with unplanned or surprise repair costs can help with your budgeting and financial planning over the years as you pay of your home loan repayments – giving you less mortgage stress
- Choice on land
By building a new home, you will have a much broader choice of where to build. There are new home estates being developed regularly with a ‘community’ in mind, giving you the opportunity to live in a functional thriving neighbourhood utilising intelligent practices of town planning.
- Greater capital gain
In most instances, a brand-new home is typically worth more after completion, than what it costs to build.
There are many benefits associated with building a new home and the process is actually a lot easier than you may think, particularly when you choose to build with an award-winning Master Builder like Ausmar Homes
Because the home building process is a more involved one and the actual home is yet to be built, it does mean that it will take a bit longer to move in (as opposed to buying existing). On average it can take months to complete a new home build.
- The inconvenience of accommodation during the build
During the moths of your new build you will likely remain renting (paying rent) or have to turn family to accommodate you for the duration of the build. Master builders like Ausmar Homes understands the significance of timing and offer their customers unrivalled communication through every stage of the build journey, allowing you to better plan and prepare with minimal inconvenience.
- The cost could blow out
This is where your pre-build research will come into play. The more educated you are as a home buyer the better off you will be financial. There are some instances where builders might try to quote aspects of the build at a higher rate and because of this, you need to be an informed participant in the process. In addition to pricy quotes, you should always read and re-read your contract to be confident about what exactly is included in the build and what is not so that you avoid any nasty budget blowouts down the track (don’t make assumptions).
So, do you buy or do you build?
Now that we’ve looked at the advantages and disadvantages of both it’s evident that the decision ultimately is a unique one and will be different for each market and each type of buyer. On occasion, buying may be the better option for investors and home buyers who have a more established financial position and existing equity, whereas it may be that building new is more suited to those first home buyers who may need a helping hand in the form of government grants and incentives.
Helpful hint: Be sure to do your due diligence before signing on the dotted line to save yourself major headaches and heartache down the track whether you choose to build new or to buy an existing home.
With Ausmar Homes, becoming a homeowner can be a reality. The team at Ausmar Homes want to show you how you can escape the rental rut and own your first home with as little as $10K deposit
The is an exclusive first home buyer’s solution that gives you the opportunity to enter the market and build something of your very own. No gimmicks, we just have a way to help people, couples and families just like you to achieve owning a home sooner.
It is a sensible solution that allows the first home buyer to build a brand-new home with Ausmar Homes.
You don’t need to wait till you’ve saved a 10% or 20% deposit to own a beautiful Ausmar Home. You can now enjoy your very own home without unnecessary mortgage stress. All you need is;
- To have a solid rental history, even if it’s as short as three months,
- To be able to qualify for the state governments first owners grant and
- To have a clear credit history
We want you to love your home for a lifetime so it’s all about ensuring you’re in a qualified position to start a new home build.
Ausmar Home’s first home buyer’s solution (as with all our home builds) is backed by honesty, integrity and transparency throughout the entire build process. We want you to enjoy the journey without the stress and worry that may come with such a significant project.
Ausmar Homes is an award-winning builder who has built a strong reputation of being accessible and communicate throughout the build process.
Simply contact our First Home build specialists and we’ll be in touch and have you on your way to owning your first home sooner than you thought.