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Thread: Buying a House v/s Building a new one

  1. #1
    Join Date
    Feb 2011
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    Germany
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    Default Buying a House v/s Building a new one

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    Hey guys,
    We are planning to move to NZ soon and there is one question stuck in my mind.

    What is cheaper, to buy a house which has already been built or to build a new one by hiring a contractor/builder? (considering all circumstances the same i.e. no of rooms, area, design/architecture etc.)

    I did some research about this on the internet and I found that:
    1. To answer this question correctly, we need to know the town where we want to buy/build a house, the market rates, labour costs in that town etc. The cost of building a house varies significantly according to the proximity/availability of resources and people.
    2. Building a new house usually means more paperwork and you have to wait for it to be built
    3. You really need to trust the builders making the house (especially because I am not from a construction background)

    So what is your personal opinion about it?

    After giving a thought about it myself, I came to the following conclusion:
    How can something, which is older cost a lot more than something (similar) which is being newly built?
    Even if the cost of building a new house is higher (labour, material costs increase over time, markets fluctuate), the seller of an existing house would still give his/her house away at the current market price. The value of the existing house would have increased anyway over the years. Also, I don't think any normal seller would sell his/her house at a cost which is lower than what was required to build it. Hence, I end up paying the cost of the building the existing house (built a few years ago) + whatever the seller wants to earn as a profit by selling the house. Could this cost still be a lot lower than the cost involved in building a new one?


    Again, I have no background of construction and have no experience in owning any house, so my questions, thoughts might sound irrational.

    Thanks,
    Zeiger

  2. #2
    Join Date
    Feb 2011
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    Germany
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    Oops, there is a similar thread here:
    http://www.enz.org/forum/showthread.php?t=33280

    Although there is not much discussion.

  3. #3
    Join Date
    Jun 2010
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    Ōtepoti, Aotearoa
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    Quote Originally Posted by zeiger View Post
    the seller of an existing house would still give his/her house away at the current market price. The value of the existing house would have increased anyway over the years. Also, I don't think any normal seller would sell his/her house at a cost which is lower than what was required to build it. Hence, I end up paying the cost of the building the existing house (built a few years ago) + whatever the seller wants to earn as a profit by selling the house. Could this cost still be a lot lower than the cost involved in building a new one?
    Two experiences - that apply in both NZ and GER.
    1. Prices do not necessarily increase continuously overtime ad infinitum. If you do a wee bit of research you'll find that prices can decline quite a bit.
    2. Depending on personal circumstances one might be forced to sell at such a point where the price one is selling is lower than when one bought.

  4. #4
    Join Date
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    Bristol, UK -> Nelson!
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    It depends on the quality of the existing house.

    It's cheaper (with current market value) to buy a reasonably new house than to build a similar one - this is because the market is currently low but land and building costs have stayed relatively constant.

    With some houses the build cost almost always exceeds the market value - these are the larger architecturally designed homes, in challenging areas (eg steep hillside), with 'off grid' features in terms of utilities. Most houses I would imagine the build cost and the market value roughly equate (including the cost of the section). In some cases, the build cost can be lower (flat section, smaller house, 'off the peg' fixed price build from local company rather than independent master builder) - possibly at the expense of the quality of the finish but this clearly depends on which building company you go with.

    For what it's worth, as the current market is so low and the economy is still struggling, we've been told that build cost is going to exceed market value for the foreseeable future.

    When you factor in the likelihood of overruns, needing a contingency budget (my friend's house recently finished overran to the tune of $90k), needing to rent somewhere for the amount of time your house is built, needing to pay council fees etc on top of build costs - you can see why an existing house is cheaper. I estimate we've spent somewhere in the region of $50k so far just on the preliminary fees.

    We aren't going to be able to sell ours for market value when we finish it, because we'll have spent far more on it than it's worth! However, we're going down this route because there isn't the type of house on the market that we want to live in - so building our own seems the only way.

  5. #5
    Join Date
    Jul 2008
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    North Canterbury, New Zealand
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    With an existing house you are often getting a lot more 'infrastructure' than the equivalent new house built on a bare section so it is not an easy comparison. All the 'little' things that the owner of a new house ends up buying will add up to many tens of thousands of dollars: landscaping, planting, fencing, sheds, barns, heat pumps, outside lighting, decks the list goes on.

    Some things you can throw money at, others you can't. If you want an established garden rather than living in a building site that will take 5 years (or so) to achieve. If you have visions of your children playing in the garden it's no use having one that will be ready in a few years time.

    For a lifestyle block (5+ acres) these figures are more extreme.

  6. #6
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    Take the example of a new sub-division area in development. This takes away the 'location' cost factor. Comparing to buying an existing house in the new sub-division that is say 1 or 2 years old vs. building from scratch on an empty lot in the same area, I would have to say it's cheaper to build new. The only advantage of buying an existing built house is the time factor. Why? Because houses going up for sale involves real estate commissions which the seller has to absorb (and thus may want to keep prices higher to recoup the cost). In building brand new, you're only dealing with the building company and no real estate agent.

    Around 2 years ago we were bidding on a single story house, 4 bedroom, 240sqm size house in the same area where we built. We were the highest bidder but the seller wanted like $460,000. Same size house built last year would go for the same price and it's ALL brand new. The auctioned house was built in the earlier stages of the development (some 7 years ago).

  7. #7
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    There are economies of scale to consider too. A house built as part of a development by a large house building company will have been a lot cheaper for them to build (and consequently cheaper to sell on) than it would be for you to build a similar house.

  8. #8
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    Feb 2006
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    Motueka, NZ
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    I am in the process of selling one house and buying another. It is much cheaper to buy an existing house than to build a new house, which we wanted to do.

    Mass produced houses on estates have less of a saving than one off architect designs.

    Double glazing, decent insulation and cental heating is still rare in NZ. Electric blankets and extra sweaters are the norm.

  9. #9
    Join Date
    May 2009
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    Auckland (from Leeds UK)
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    Buy BUy BUY!

    Read my house build thread...

  10. #10
    Join Date
    Jan 2007
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    North Canterbury to UK
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    Build build build you'll love it ,we did

    We got what we wanted, warm , well insulated, double glazed, central heating, spacious, views and land

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