Is it better to buy or build your home in Australia?

Is it better to buy or build your home in Australia

The Great Australian Dream has always been to have a home to call your own. But one of the hardest questions many would-be home owners need to answer is whether it’s better to buy or build it.

And if you’re hoping to keep costs low, you may want to know which option is the most affordable for your budget, especially in a time of skyrocketing dwelling values and land prices.

Housing values across the country grew by 1.3% for the 14th month in a row, according to the latest CoreLogic research for November 2021. This brought the national housing value up 22.2% for the past 12 months, equating around $126,700 to the median value of Australian homes.

Meanwhile, land prices are also skyrocketing across the nation, with the cost of land in Australia up by $1.72 trillion, 97.1% of which is in residential land. In NSW alone, residential land values grew by 25% to 1.8 trillion in the 12 months to July 2021, according to the NSW Valuer-General’s annual report.

So, are you better off buying a home or building one in Australia in 2022? Let’s explore the benefits and disadvantages of both options, as well as how you may be able to afford your ideal option.

 

The advantages of buying an existing dwelling

Get on the property ladder today

If you want to get a foot on the property ladder but need to do so quickly, you may be better off purchasing an existing dwelling. This is because the process of building a home can take a considerable amount of time and construction. And with the current global supply chain delays, obtaining much-needed components to build your dream home could be on the back burner until at least 2023.

If you have a growing family, for example, you may not have the luxury of waiting several years for the space your household needs now. Plus, you can always buy a home with good bones and make plans to renovate it to suit your lifestyle and goals down the road.

Greater supply

It’s no secret that part of the issue influencing eye-watering property values is the lack of supply. But when you contend with the amount of properties versus amount of available land in your ideal suburb, there will typically always be more homes than land – especially if you’re buying in a capital city like Sydney or Melbourne. You may be waiting even longer to get the keys to your dream home if you’re waiting for land to appear in the right place.

 

The advantages of building your own home

Make your dream a reality

The most significant benefit of building your dream home is that you get to make your dreams into a reality. You’re able to customise the home to suit your preferences and lifestyle and choose materials and fixtures that appeal to you, and not the tastes of a previous owner from another decade.

Further, for Aussies that are intimidated by construction costs, there may be other affordable options available. Turnkey properties are a popular choice for those with limited budgets, for buyers hoping to build in a growth area, or those requiring a guaranteed build time. While there may be less customisation involved, you’ll still be building a brand new home.

Building brand new

When you purchase an existing dwelling with the intent to renovate it, there can often be a number of unforseen costs you may have to pay for. If you’re buying an old home, for example, there may be major repairs that your building inspection didn’t catch, such as old pipes, bad wiring or damage to the foundation.

Another advantage to building your own home is that you’ll typically choose new materials and features. This means you won’t need to worry about the pipes leading or cracks in the flooring wreaking havoc anytime soon.

Is it cheaper to buy or build a home in Australia?

Research from Finder.com.au shows that for most Australian cities, it can actually be significantly cheaper to build your own home than buy. In fact, Perth was reported to be the only capital city where it’s more affordable to buy an existing dwelling.

 

City Building Buying Difference
Sydney $857,638.50 $1,134,809.50 Building = $277,171 cheaper than buying
Melbourne $701,758

$689,418 (first home buyer)

$830,863 Building = $129,105 cheaper than buying

Building = $141,445 cheaper than buying (first home buyer)

Brisbane $626,848.50

$620,148.50 (first home vacant land concession)

$677,848 Building = $50,999.50 cheaper than buying

Building = $57,699.50 cheaper than buying (first home buyer)

Adelaide $502,452 $582,710 Building = $80,258 cheaper than buying
Perth $588,103

$582,502 (first home owner)

$547,663.50 Buying = $40,439.50 cheaper than building

Buying= $34,838.50 cheaper than building (first home buyer)

Canberra $838,744.20

$831,213 (home buyer concession)

$911,502.40 Building = $72,758.20 cheaper than buying

Building = $80,289.40 cheaper than buying (first home buyer)

Source: Finder.com.au

 

How to finance your Great Australian Dream

The choice between buying or building your ideal home is a personal one that will depend on your financial situation and goals. Whichever option you choose, it may be worth looking into the financing options you may have.

To finance the purchase of an existing home, Aussie home buyers will typically seek out home loan pre-approval, before signing on the dotted line. Prioritising a lower rate or lower fee home loan may also help home buyers to lessen the sting of home buying, particularly with interest rates tipped to rise in the next few years, if not months.

Also consider factoring in whether home loan features, such as an offset account or redraw facility, may be helpful for your home loan. While these may cost a little more, Reduce Home Loans offers first home buyers these features with some of the most competitive home loans on the market.

If you’re interested in building your dream home, you may want to consider if a construction home loan is right for you. Unlike a traditional home loan, a construction loan generally drip-feeds you the funds you need throughout the different stages of home building. Once the property has been built, the construction loan may revert into a typical home loan.

 

For more information on traditional home loans or construction loans, or to speak to an expert, please don’t hesitate to reach out to our team at Reduce on 1300 733 823 today.

 

Any statement/s are general in nature and do not take into account your financial personal situation, objectives or needs. You should consider whether any statement/s is suitable for you and your personal circumstances. Before making any financial decision, consider your circumstances and the product disclosure statement.

1300 733 823

(29)    For the Rate Cutter Variable where the borrower pays $1170 upfront fees then a corresponding loyalty discount of 0.10% p.a. off the Rate Cutter Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(27)    For the Investor Rate Slasher Cash Back Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Investor Rate Slasher Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(26)    For the Low Rider Cash Back Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Low Rider Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(25)    For the Economizer Cash Back Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Economizer Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(24)    For the Super Saver Cash Back Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.10% p.a. off the Super Saver Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(23)    For the Super Saver Variable where the borrower pays an upfront fee of $1170 then a corresponding loyalty discount of 0.15% p.a. off the Super Saver Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(22)    For the Economizer Variable where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.11% p.a. off the Economizer Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(21)    For the Investor Cash Back Hero Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Cash Back Hero Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(18)    For the Home Owners Dream 1 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Home Owners Dream reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(20)    For the Cash Back Hero Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Cash Back Hero Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(14)   For the Investor Rate Slasher where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.09% p.a. off the Investor Rate Slasher rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(12)   For the Investor Rate Lovers Interest Only where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.07% p.a. off the Investor Rate Lovers Interest Only rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(11)   For the Wealth Maximizer 3 year fixed Principal & Interest where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Wealth Maximizer reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(10)    For the Wealth Maximizer 2 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Wealth Maximizer reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(9)    For the Home Owners Dream 3 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Home Owners Dream reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(8)    For the Home Owners Dream 2 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Home Owners Dream reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(7)    For the Investor Rate Slasher where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.09% p.a. off the Investor Rate Slasher rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(6)    For the Investor Rate Buster Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Investor Rate Buster Variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(5)    For the Rate Buster Variable where the borrower pays an upfront fee of $150 then a corresponding loyalty discount of 0.05% p.a. off the Rate Buster Variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(4)For the Rate Slasher Variable where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.08% p.a. off the Rate Slasher Variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.

(3) For the Investor Rate Lovers Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Investor Rate Lovers Variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(2)For the Rate Lovers Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Rate Lovers Variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(1) For the Low Rider Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Low Rider Variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.

(28) For the Rate Crusher 1 Year Fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.05% p.a. off the Rate Crusher reverted variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.

(19) For the 1 Year Fixed Wealth Maximizer where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the 1 Year Fixed Wealth Maximizer reverted variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.