- Existing homes tend to be situated on larger stands and are closer to the CBD and established infrastructure.
- They often come with established landscaping, allow for a quicker move and generally offer better investment potential.
- Building your own house means you can create a home that exactly matches your specifications – and issues and defects are usually covered under guarantee.
- New builds generally have lower ongoing maintenance and running costs.
When it comes to building vs buying a house in South Africa, everyone will have their own reasons for choosing one over the other. Ultimately, it’s about what’s right for you.
However, those unsure whether it’s better to buy a home or build one should take into account the cost of building a house in South Africa versus the cost of buying one, as well as other factors that can play an important role.
Building vs buying a house: How do I make the choice?
Here, we present a guide to the pros and cons of each approach, so that you can make an informed decision.
The advantages of buying an existing home
- An established property will usually be located closer to a city center than a new home (vacant stands are rare in inner-city areas). This means it will be close to schools, public transport, work opportunities, and restaurants.
- An established home may already have a garden, and even a swimming pool; things you’d have to pay through the nose for in a new build.
- Buying an established home is a quicker process, usually taking around three months to secure the home loan, pay the deposit and present attorneys with necessary documents.
- You can compare prices when investigating established homes, and look for the best deal when applying for a home loan.
The complications of buying an existing home
- The home may be located in an older building, which may not be sufficiently energy-efficient. In fact, it may not be well-suited to the current world of tech at all.
- You may have to perform renovations to get the home up to standards. Depending on how extensive the renovations are, you may end up practically having to build a new home anyway.
- The home will feel “lived-in”, which can be a turn-off for people looking to start anew with their family.
- Older properties can be sold ‘voetstoots’ without a warranty.
The advantages of building a new home
- Building a new home provides tax benefits, such as the ability to claim depreciation over the next few years.
- Since there’s no transfer of property from one owner to another, you save on transfer duty and avoid some of the legal processes that home buyers have to go through.
- You can build a modern home that is more energy-efficient and tech-friendly.
- You can build a home to your exact specifications, including interior design.
- A brand new home will have fewer maintenance issues.
- The feeling of knowing you and your family will be the first to live in the home.
- There’s less competition for buying a plot of land and building a home on it than there is for buying established homes.
- Designing and building the home yourself will strengthen your feeling of ownership over it. The stories you’ll share with your friends while you’re enjoying a cold one around the braai become more real, and you’re passionate about them because you were involved in the process.
The complications of building a new home
- New homes take months to build and can involve a number of delays and complications.
- You may need to rent a property to live in while your new home is being built.
- Adding a garden can significantly raise the costs of building a new home.
The pivotal question: Is it cheaper to build or buy a house?
So once you add up all the costs, which approach is going to make a bigger dent in your financial resources? Data shows that building a home costs 20-30% more on average.
It shouldn’t come as a surprise to anyone that building a new home is more expensive. However, in the long-term, it can save money by eliminating the need for costly renovation, along with the legal fees of transferring the bond. A new home will also be more valuable, thanks to a more modern design.
Getting a loan for building a home
If you decide to build a new home from scratch and need finance to do it, you need to apply for a building loan. The process is similar to applying for a home loan, requiring a thorough evaluation from the bank that includes checking your credit record.
However, in this case, the funds are paid to the building contractor, and the bank retains the final payment until construction is complete.
Of course, if you choose to buy an established home instead, you’ll have to apply for a home loan.
In the case of a building loan or a home loan, you can employ a home loan comparison service such as ooba home loans to apply to multiple banks on your behalf and compare interest rates to secure you the best deal.
ooba home loans also offer a range of tools that make the home buying or building process easier. Start with their home loan calculators; then use their free, online prequalification tool, the ooba Bond Indicator, to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.