Build New House or Buy Established?

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  Kangal on 13/03/2017 - 19:27

  +3

  I say have a look at the market, and see if there's any houses you're actually interested in.

  Building your own home is one of the most stressful things:
  - Find the land (make sure its in good location, decent price, developable)
  - Design your house (people change their minds a billion times)
  - Look for builders (quotes, dates, etc etc)
  - Trouble with builders (they delay, use different materials, get something wrong)
  - Budget constraints (you run up dry, don't know what to do, etc etc)

  … … then at the end of the day, you put it up for rent :\

  I say you're better off buying a run-down house, then renovating/flipping it.
  Once its done tastefully, see if you can afford renters and keep it.
  You'll have the satisfaction of "I built it" with much less anxiety that comes with "I designed it".

  • 

    Hunter14 on 13/03/2017 - 19:46

    Thanks for commenting! I will definitely take your points on board. Although, renovating is probably not my kind of thing and something that I'd prefer to avoid. I have a few friends who have built new houses so can go to them for tips. Also, I have a tiny bit of experience when my parents built their house and I was pretty much the main contact during the whole build. I had a very good experience with the builders and everything went reasonably well. So maybe that is why I'm more inclined to build compared to other people's experiences.

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  jason101 on 13/03/2017 - 19:37

  +2

  I built my first house (through a home builder) when I was in my late 20's - all I can say is that despite working within the real estate development industry I severely under budgeted the additional costs to establish a new home. It wasn't a deal breaker as both myself and partner were on reasonable salaries but I have to say for a "typical" SINGLE INCOME wage an salary earner it would have been hard work. Here is a list of things we installed after we thought we had signed a building contract to build that home: TV antenna, clothes line, security door, air conditioning, alarm system, solar panels, paths, driveway, gardens, letterbox, irrigation system, pergola, carpets, tiles (inside and porches), light fittings, side gate….outdoor lights, stormwater system, rainwater tank, rainwater pumping system, retaining wall, fences. All up it was about $100k of "extras" I hadn't really considered. When its all finished its really nice and something you can be proud of - also we then lived maintenance free for the next 8 years, we sold the house for slightly more than everything cost us and we enjoyed it for the period of time we were there, effectively considering the small capital gain vs the interest we lived "free" for 8 years - then decided it was time to build another new house ! (cost blow out this time was more in the region of 400k - but at least we knew what we were getting ourselves in for)

  • 

    Hunter14 on 13/03/2017 - 19:51

    Hey mate, thanks for the comment! Very insightful given that it's from someone who's been through a couple of builds. What I took from your comment is that building can be mentally stressful but can be worth it in the end if you are willing to go through the ordeal. Also, the fact that you built again after the first experience tells me that it's a good option to go if you have the right experience. I will definitely put a budget aside for all those 'extras' that a lot of people wouldn't think off. Thanks again :)

    • 

      aragornelessar on 13/03/2017 - 20:59

      +1

      That can be the same as an established house too - especially if you're living in it.

      Dont like the lights? Might need to change them.
      Air con faulty? Replace/Repair
      Landscaping isn't perfect? Time to pull up the garden beds and start over.
      Well used floorboards? Costs money to install/repair.

      Unless you find your absolute ideal home in good nick, you'll likely end up continuing to spend on renovations/repairs also.

      • 

        Hunter14 on 14/03/2017 - 12:30

        Yep, I was also thinking this. I think if anything, it would be more expensive to replace/repair things that are broken or I don't like. Rather just get it right from the start. Not really a fan of renovation either but I will consider all options and hopefully come to a satisfactory decision.

• 

  oscargamer on 13/03/2017 - 19:49

  +2

  what you buy/build is not nearly as important as location, location, location

  • 

    Hunter14 on 13/03/2017 - 19:53

    Yep, that's what everyone says to me. I want to be somewhere that's within 10-15km from the city. The trade off is smaller land or older houses. Although, I'd rather live in a smaller house and land near the city than a big house far from the city.

• 

  mskeggs on 13/03/2017 - 19:57

  +2

  Although this probably shouldn't be a valid reason: I just want to have a house the way that I designed it.

  I think this is the only valid reason to build.
  You might consider however, that your preferences now might change dramatically if you get a partner or have a family. Mine have changed pretty much every 5 years since I became an adult. My biggest issue is "fighting the last war" where the houses my spouse is looking at now as our next move would suit us now, but we have 2 kids finishing school in the next 4 years, so I am inclined to wait a little while then move to something that will be reflective of our updated needs then.

  The word on the street seems to be there is a bit more pain in Perth before prices bottom out, so you probably have no reason to rush…

  • 

    Hunter14 on 14/03/2017 - 12:26

    Thanks for the advice. I've always had it in my head to build my first house and have it exactly the way I want. I think the only thing I'm concerned about, like a few people already pointed out, is the land size. Also, I'm looking at areas in Perth with very good schools so already got the future in mind. Not completely ruling out buying an established house though because I know sometimes you got to be sensible in life.

• 

  Stewardo on 13/03/2017 - 20:06

  It really depends why you want to buy it? No wrong answer really, both options have pros and cons
  I'd agree with Jason that you could add 100k on top of builders cost once you factor everything in and set a house up properly.
  The problem with some new estates is it becomes a supply and demand issue, if there is plenty of blocks still available in the area 5 years later the price of the blocks may stay the same, often if they stage the releases of land, this can slow the appeal of an ready built five year old house as people in the market can build there own. Often new estates are out of town, have a high level of rental properties, and lots of young families, this may not appeal to everyone. It's hard to predict how new estates will turn out once complete, some become very desirable, some a bit slumy.
  They can be more tax effective and less maintenance and have that new house appeal.

  • 

    mskeggs on 13/03/2017 - 20:25

    +1

    Without trying to be rude, because I know a bunch of people who had a great result from building on a new estate, but the options available through a estate builder are all a bit 'same-y'.
    If the reason to build is to design the house tailored for the owner, an estate isn't likely the right way to do it.
    There are empty blocks, or newly subdivided blocks in non-estate areas, but you will pay much more for land, but it will be more predictable in its future value.
    I was answering thinking about where I live where there are still some vacant lots amongst well established houses, which I realise is not the normal scenario for building.
    I would hesitate to build in a new estate for the reasons you listed.

• 

  [Deactivated] on 13/03/2017 - 20:31

  +2

  I'd prefer to buy an older house and do it up, normally older houses have better locations for the same price as a new house. closer to train stations, shopping malls etc.

• 

  Limitless on 13/03/2017 - 22:33

  +1

  Pros and cons for both options. I guess the key thing for me would be the land size.

  Not sure where you are planning on buying but rough costs:
  Land: 350k for 370sqm
  House: 200k for 4x2x2
  Then there are all the extras…floors, blinds, security etc. So that's 550k just for the build. You could easily get a nice house for 550k with more land to move around on. But finding the right house is the tricky part….

• 

  butwhy on 14/03/2017 - 07:12

  The house itself is a depreciating asset. The land on the other hand…. if you can find something you would be happy with that is existing, I think that's a better buy

  • 

    oscargamer on 14/03/2017 - 09:17

    That is a very weird way to say it

    You can't exactly separate the two, they sort of come as a package deal. Together, they are (long term) an appreciating asset.

    • 

      butwhy on 14/03/2017 - 09:56

      +1

      It is a weird way to say it, but it is also true. A new house will appreciate for the first maybe 10 yrs or so, then then start to "go down" in value, unless you have had serious renovations. For example, the biggest cost items (kitchens and bathroom) go out of style and date, even if they aren't used at all.

      Just look at your council rates. For an old house, the capital improved value won't be much more than the land value.

      People pay a premium for a brand new or near new house. Obviously it will be nicer to live in, fit better with today's living style, and be more energy efficient.

      Obviously if a place is so bad that it would be cheaper to rebuild than renovate, then do that.

      For the volume builders in Melbourne, you pretty much have to double their display home price to get a realistic final build price.

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  MeesusEff on 14/03/2017 - 12:11

  +1

  I am also looking for my first home in Perth :) I did consider the option of building as you get to save on stamp duty + $15k FHOG, so about… $40k. But I have seen the steps involved in building a house. My parents develop property and they tell me its not worth the stress (I am not a very imaginative person so when I am confronted with options I'll just go ahhh!), as buying a land + house would cost not much less than buying established.

  The thing with buy+build now is that land size is very small, about the 350sqm mark in the 'good areas', unless you are willing to live in the likes of Mandurah/Butler/Alkimos etc. The established houses generally have a bigger land, even if the houses are older.

  • 

    Hunter14 on 14/03/2017 - 12:20

    Hey mate! Good luck with your journey. I thought building a new house meant the FHOG offsets the stamp duty. Or do you not pay any stamp duty at all plus get the FHOG? Can anyone else please confirm this?

    I totally understand why you would want to buy an established house. However, I am the type that would enjoy the journey. I probably won't enjoy conflicts with the builder and contractors but I would enjoy the pre-start and selection processes and just watching my project slowly grow week by week.

    Also, I know land is gold but since it's a house I would probably live in for a while, I'd rather it be new with a small backyard than old with a big backyard. Just my preference. Maybe not the smartest way to look at it from a financial perspective.

    • 

      MeesusEff on 14/03/2017 - 12:32

      Oops, sorry I worded it pretty badly. You only pay stamp duty on the land, so its significantly lower than the 'big lot'.

      Ahh, yes it can be quite an exciting journey! I can imagine the satisfaction of having things where and how you want them. Also omg, yes. So many houses i've looked at, had teeny tiny rooms and a MASSIVE backyard. Guess people back then focused on having the kids play out in the yard rather than hiding in their rooms :P

      • 

        Hunter14 on 14/03/2017 - 12:39

        Oh okay. Yeah, that's the way I understand it. The stamp duty on the land pretty much gets offset by the FHOG.

        Yep, I guess us generation Ys don't appreciate the 'big backyard' lifestyle as much as the last generation. I just want a small lawn in front of the house and just an alfresco area in the back. Maybe room for a small shed. That's it.

        What suburbs in Perth have you been considering if you don't mind me asking?

      • 

        MeesusEff on 14/03/2017 - 12:44

        @Hunter14: I was looking very heavily into the Cockburn (Success, Atwell, Aubin Grove, Hammond Park) area, AFAIK they still have land+home packages around there. My parents are in Rossmoyne and sister in Success, so wanted something that wasn't too far away and close to shops/schools etc as well. Wandi has been developing as well, but the land prices there are quite expensive even though no facilities are around! Didnt venture north at all as it'll be too far for me.

      • 

        Hunter14 on 14/03/2017 - 12:56

        Haha, that's funny because I'm looking for land/houses around where your parents are because I want to be in the Rossmoyne or Willeton school zone. The land prices there are murder, let alone established houses! I think the best I can afford in that zone is Riverton and even that's out of my budget. Hoping the prices drop a bit later during the year.

      • 

        MeesusEff on 14/03/2017 - 13:56

        @Hunter14: Haha, I also wanted stay around the same area… but hard to get for under $750k… can get really old ones for that price, whereas if move further up, you can get a really nice place for the same price. Gotta weigh up the pros and cons I guess.

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  Hunter14 on 14/03/2017 - 15:48

  Thank you for all the comments so far! Very helpful. I just want to ask another question in regards to double blocks with one house in the front and another in the rear. Would anyone recommend these types of properties? Is there anything I should know before looking into these? Thanks again!