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To build or buy

23 Sep 2008
Antonella Dési explores the various pros and cons of buying an existing home versus building a new one from scratch.

According to research undertaken by ABSA Home Loans, "In the second quarter of 2008 the cost of building a new house increased by a nominal 8,4% y/y, compared with a rise of 9,6% y/y in the first quarter. This contributed to the average price of a new house having increased by a nominal 16,7% y/y to about R1 074 600 in the second quarter of this year, which translated into a real increase of 5,2% y/y. The average price of an existing house increased by a nominal 3,2% y/y to about R954 800 in the second quarter of 2008, which caused real prices to have declined by 7% y/y in the quarter. As a result, the nominal price difference between new and existing houses was about R119 800, or 11,2%, in the second quarter."

With figures like these, it is clear to see that there is a nominal price difference building and buying a house. Sioux Driver, from PACErez, says that although the idea of building a new home might be very tempting, she still believes that when it comes to single dwellings, the benefits of buying an existing home, far out way new builds: "There are many benefits of buying an existing home. You can move in immediately. You don't have holding costs (rates and taxes) to pay while the home is being built. These costs obviously accrue for as long as the building lasts, which in some instances can be as long as a year or more. Not to mention the cost, potential security hazard and the loss of privacy that having a building team on site for that long presents.

"Sometimes it is difficult to translate an architectural drawing to the real thing, which may lead to the end product of a new build not meeting your satisfaction," she says. Driver points out that presently the cost of building materials is high, and one of the most common occurrences with regards to individuals building their own home, is that they often end up spending more than expected due to unforeseen expenses that crop up along the way: "This can be overcome by appointing a quantity surveyor, which is obviously the safest route, but once again, this service does not come cheap and will add to the total cost of the project." Other negatives include having to spend money on establishing a new garden, security and paving and the hassle of having to keep your eye on the project during the entire duration of the build to make sure everything is going according to plan.

There are of course also numerous positives to building your own home, not least of which is the fact that you can build your dream home – you can decide on your own architectural style, its size and layout, as well as being able to choose all your own finishes. In this way, you won't have to put up with outdated finishes or the previous owner's tastes. Although it is a risky business, homeowners who choose to hire building contractors that are registered with the National Home Builders Registration Council (NHBRC), do have some kind of assurances, such as a 5-year major structural defect warranty as well as a 1-year roof leak warranty.

There are however, certain factors that need to be considered when it comes to new builds and financing. First off, the stand has to be within a proclaimed suburb, which means that the local authority confers it to be within a designated suburb and will provide water, electricity, sewerage and refuse refusal, as well as other essential services. Check with your local authority that the stand you want to buy is within a proclaimed suburb. If the bank is to finance your new build, it will require a copy of the local authority-approved building plans, quotes from your builder and proof that you have purchased your stand. An assessor will then assess the stand on which the building will be built to gauge its stability, as security for the loan to be advanced. The bank-appointed assessor will then estimate the cost to complete the house, which will determine the maximum loan that will be granted, and will also ensure that the appointed builder is registered with the NHBRC.

There is no doubt – buying an existing home is a much simpler and quicker process. There are also numerous benefits, including the fact that from a security point of view, it is less likely that there will be vacant stands surrounding your property. Instead the home will most likely be in an established area, which will have access to all the necessary arterial routes and necessary amenities. Also, the average land and building area of older properties is generally larger than that of new residential stands and newly built homes. You will also be able to see and inspect what you are buying first hand, or if you don't want any nasty surprises, you can even get a home inspector to come in and check it for you, so that you know all the strengths and weaknesses of the property upfront before you make the deal.

Bill Rawson, chairman of Rawson Properties concludes by saying that if it is a question of renovating or moving, he believes that renovating is the better option. This will no doubt also be a less expensive option, as you will not have to fork out money for estate agent's fees, transfer duties, and so on. He explains: "Often, I come across situations in which by taking out a new bond or adding to an existing bond, the home can be made more comfortable and convenient to the owner and significantly increase its value. In these cases, it is infinitely preferable to go this route rather than through the trauma and upheaval of selling and then building new, especially if you like the area you are already settled in." - Antonella Dési


Images courtesy of Pam Golding.

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