Is it really more expensive to build your own home?

Asking yourself if it’s better to build, or buy an existing property, is a great place to start as there are pros and cons on each side of the buying fence.

While price is often the most important factor, it’s vital to understand the hidden costs that come with buying an established home, building a house or buying an apartment off the plan.

REA Group senior economist Anne Flaherty says the decision really depends on a purchaser’s personal circumstances.

“Whether it's going to be more expensive to buy established or new, in large part, depends on a buyer's goals,” she says.

“One of the advantages of buying new is that the buyer often has input into the finished home. In contrast, when buying established, it’s often the case buyers will want to change existing features, which of course comes at a cost.”

REA Group senior economist Anne Flaherty says the most important consideration between building and buying is the purchaser's goals. Picture: Supplied

Anyone building or renovating should also consider rising industry costs.

“The consensus is, we're not going to see construction costs fall. There was a period of very rapid rises during 2021 to 2023,” Ms Flaherty adds. “Although we’ve seen a slow down in the speed at which those construction costs were rising for most markets, it’s still continuing to grow.”

In the 12 months to September 2024, construction costs increased by 1.4%  –  a modest rise compared with the 17 % they jumped in the year to June 2022. Since then, build periods have also increased.

“The time it takes to build is now at a record high. Across Australia, on average, it's taking more than two years for a new apartment to be built, from commencement to completion, for town houses it's sitting at just over one year and for houses it’s close to a year,” Ms Flaherty explains, citing recent Australian Bureau of Statistics figures.

Gold Coast-based Mortgage Choice broker Deslie Taylor says many purchers, especially first-home buyers, are seduced by stamp duty exemptions and base prices, but they don’t always crunch all the numbers.

Mortgage Choice broker Deslie Taylor says buyers need to careful they fully understand what is and isn't offered by builders. Picture: Supplied

“You need to consider the costs during a build. Yes, it may be cheaper to buy land and build, but then you've got ongoing expenses like renting while you're also paying the mortgage on the land and then progressively more throughout the construction phase. That is, unless you have the benefit of living with family rent-free,” she says.

“You need to weigh it up versus paying a higher upfront cost to get into an established property, but you're in straight away.”

Ms Taylor said she often meets with buyers trying to assess the best path to homeownership.

“It's our job to educate them about all the costs in each scenario. Do you have a financial buffer to cover ongoing costs, and is that buffer enough to cover blowouts? If the builder tells you it's going to take eight months, but it takes 12, what financial position will you be in?”

She adds that potential buyers are often unaware of what might be missing in a new build contact.

“We’ll always talk to the client about looking out for what the builder doesn't include. You need to quote everything in, otherwise you're going to be that house with sheets in the windows with no garden or driveway,” Ms Taylor explains.

“The quote they give you might look amazing, but by the time you get to the gallery phase and you see what they're offering, you might have to then pay another $20,000 or $30,000 just to get the quality finishes you want.”

Alternatively, a win for those buying a new property today, according to Ms Flaherty, is the chance to freeze time financially.

“If we’re to see interest rates come down next year, that could push property prices higher,” she explains. “So one advantage of buying off the plan now is locking in a price today, then you have a bit of extra time to save for settlement day - but you’ve paid yesterday’s price.”

Ultimately, the preference between new or old is personal, but if budget is a big factor it makes sense to do the sums to see what adds up in your favour.

The case for buying a brand new home

From government and building company incentives, to the perks of being the first to live in a home, a brand new build ticks plenty of boxes for some buyers:

Stamp duty savings

Depending on which state or territory you’re purchasing in, what type of buyer you are, and how much you’re spending, there may be no stamp duty or only a discounted duty payable which could equate to tens of thousands of savings:

New South Wales

Stamp duty in NSW is calculated on a sliding scale – the higher the property’s value, the more you will pay.

Australian Capital Territory

Stamp duty in the ACT is progressive, with the percentage of duty payable increasing as the property price increases.

Victoria

Stamp duty in VIC is tiered and calculated as a percentage of the property’s purchase price.

Tasmania

Stamp duty in TAS is also calculated as a percentage of the property’s purchase price, similar to in other states.

South Australia

Stamp duty in SA is a tiered system and calculated on a sliding scale with its first band being value up to $12,000.

Western Australia

Stamp duty in WA is based on the purchase price or the market value, depending on which is higher.

Northern Territory

Stamp duty in the NT is calculated on a sliding scale, although the threshold rate takes in a larger scope than in other states.

Queensland

Stamp duty in QLD is dependent on the value of the property as well as the type of buyer you are.

Lower bills and sustainability

Today’s homes must be built to high energy-efficient standards, which is great for ongoing household costs. You may also be able to make sustainable and ethical build choices in its construction.

Minimal maintenance

A new property generally requires a lot less TLC and if you’ve created your dream home, then there will be no need for significant renovations.

Higher returns

Newer homes typically command higher rents and can also attract more tenants who are seeking a quality home with less repairs needed.

Depreciation benefits

Investors who buy a new property can potentially take advantage of tax perks, like claiming depreciation on furnishings, fixtures and appliances. 

Time to save

Once you’ve paid your deposit, you’ll likely have an extended period of time to set up a savings plan and potentially reduce your home loan before it starts.

Hidden costs

Not every builder or developer advertises prices equally. Some marketing only shows a base price which includes just the bare minimum and excludes things like outdoor areas, appliances, light fittings, window furnishings and landscaping.

The case for buying an established home

Whether it’s buying in a favourite location, being able to move in straight away, or add value to you home over time, an existing property is the preferred choice for some purchasers:

Established homes also come with their fair share of benefits for buyers including the comfort of existing neighbourhood infrustructure. Picture: Getty

A chance to kick the tyres

You can view the property, get a sense of the neighbourhood and have a building inspector come through so you have a clear idea of what you’re buying.

No budget blowouts

An established home without need for immediate renovation means you won’t be surprised by hidden building costs.

Existing infrastructure 

Neighbourhoods that have been around for decades are home to established amenities like schools, parks and shopping precincts which add value to your home, particularly if they are within walking distance.

Past sales proof

Older homes and units can be a lower risk investment as they are a known entity with a track record of sales to. This can help you to estimate future capital growth. 

No waiting around

There is no holding out for land release, building approvals or builders so you can usually move in within a couple of months of purchase.

Renovator’s delight

An old real estate adage “buy the worst house on the best street” means you can add value and cash in on a great location. Although there’s less margin in it today, the sums can still stack in favour of established properties.

Capital growth potential

Because homes may depreciate over time, but land generally goes up in value, established houses typically to have a higher land to asset ratio than newer ones, therefore leading to better capital growth.