Is It Cheaper to Build or Buy? First Home Buyers Ask
It’s an ongoing dilemma for first home buyers: Is it cheaper to build or buy?
According to one report, there were about 170,000 new homes built nationally in the year to March 2023. Contrastingly, an average of 500,000 existing houses are sold annually. So, when it comes to buying vs. building, which is better? And is it cheaper to build or buy a house in Australia?
Is It Cheaper to Buy or Build a House in Australia?
The Urban Development Institute of Australia states that the national average price for land is $391,546 for a median block size of 406 sq m. In South East Queensland, that cost drops to $357,717 (for 421 sq m).
Determining if it is cheaper to build or buy is complicated by the fact that building costs vary drastically. The latest estimates from the building industry show a new home in Brisbane will have a low-range cost of $2,000 per square meter and a high-range cost of $4,500 per square meter. Since the average size of a new house in Brisbane is 226.1 sq m, this gives us an average low-range cost of $452,200. The total cost of building a new home can be calculated by adding the average cost of land ($357,717), for an overall cost of $809,917.
Meanwhile, the average house price in Brisbane is $870,526 (according to CoreLogic). So, if you’re considering whether it’s cheaper to build or buy a house in Brisbane, the winner appears to be building. However, before you go out and sign up for a construction loan, there are other important details to consider.
Is It Cheaper to Build or Buy – What Else to Consider
What else do you need to consider when pondering the question of whether it is cheaper to buy or build a house in Australia? Beyond the costs described above, you’ll need to calculate the potential costs of:
- Stamp duty (exemptions do apply for first home buyers in Queensland).
- Conveyancing/legal fees.
- Building and pest inspections (when purchasing an existing home).
- Applicable government grants.
- Construction financing vs a traditional mortgage while renting.
The Pros and Cons of Building a House Vs Buying
While asking, “Is it cheaper to buy or build a house?” is a valid question, there are other factors you’ll need to consider. For example, what are the pros and cons of buying land and building a new house?
Pros of Building a House
- Customized design to suit your preferences.
- Eligibility for the First Home Owners Grant.
- Installing energy-saving features may reduce ongoing costs.
- Potential savings on stamp duty.
Cons of Building a House
- Will take significantly longer.
- May have to pay rent and mortgage simultaneously.
- Can be a stressful process.
- Potential to go over budget due to unforeseen issues.
- Land may not be available in your preferred suburb.
The Pros and Cons of Buying Vs Building a House
When it comes to buying vs. building a house, you’ll typically find that the pros and cons are very different when buying a house.
Pros of Buying a House
- The process can be a lot faster (typically, 30-90 days for settlement).
- More convenient (since you can view listings online).
- Can see what you get.
- Room to negotiate on price.
- Easier to buy in an established location.
- Simplified finance options.
Cons of Buying a House
- Possible need for repairs or renovations.
- May have to compromise on certain preferences.
- Higher stamp duty (unless an exemption applies).
- Less access to government grants.
Ask the Experts: Is It Cheaper to Build or Buy a House?
Ultimately, the answer to, “Is it cheaper to build or buy a house?” will vary depending on a range of factors. So, when it comes to buying vs. building a house, what can help you decide? Start by getting some expert advice. A local real estate agent can provide insight into the cost of buying land or property, while a broker can answer all your financial questions. At North Brisbane Home Loans, our experienced brokers can offer advice tailored to your specific situation and help you determine what kind of finance will be best for you.
Are you ready to get started on building or buying your first home? Book an appointment with North Brisbane Home Loans today.
Patrick Cranshaw, a Certified Mortgage Professional for over 21 years, founded North Brisbane Home Loans in 2002. His career began with ANZ Bank in New Zealand, where he progressed over 16 years to a Business Banking role in Virginia. After moving to Brisbane in 2000, Patrick led the QLD market for a home loan agency, helped set up the REMAX Real Estate Finance division, and practiced as a broker.