In a market as complex as the Australian housing market, it can be hard to determine whether to buy or build a home. On average, building a house is usually cheaper than buying a home.
However, this can change depending on the location, type of building, and other hidden costs. Below is a comparison of the costs of buying a house vs. building one.
Cost of Buying a House in 2024
Buying a house is always the most convenient form of homeownership. It takes the shortest time and often gives you a clear view of some of the hidden costs you’ll face. In short, you’ll know what you’re getting.
How much you’ll spend on a home mainly depends on its location and the size. For instance, the median property price in Sydney is around $1,055,131, which is quite expensive compared to Perth’s $588,068.
Hidden costs are also a big part of what you’re going to incur if you opt for this route. Among the most common costs that may inflate prices include:
- Stamp duty (depends on home value)
- Property valuation fees ($100 – $300)
- Home loan application fees ($200 – $700)
- Legal and conveyancing fees ($700 – $2,500)
- Mortgage registration and transfer fees ($450 – $1,500)
- Pest and building inspection fees ($300 – $600)
- Council and water rates ($500 – $1,400)
- Lender’s mortgage insurance (1 – 3% of loan)
- Moving costs ($75 – $300 per hour)
If you’re a first-time buyer, some states exempt you from a few of these taxes like the stamp duty. However, this still leaves the cost of buying a home quite high.
Buying some homes may also come with recurring costs such as repairs, council rates, insurance, among others – which you’ll have to pay.
Cost of Building a House in 2024
If you opt to build a house, your biggest costs will come from purchasing or leasing the land, and the cost of the materials.
The median building cost in Australia ranges between $611,298 and $1,020,556, depending on the location, or around $620 – $3,900 per sqm. These prices are high and are continuing to rise because land keeps appreciating. The cost of labor is also a huge factor in construction. In periods of labor shortage, your construction costs could rise rapidly.
Other factors that will influence the building costs include:
- House size – Larger houses will require more labor and materials, hence cost more.
- Finishing quality – To get the best quality finishing in your home, you’ll need high-quality materials, which tend to be more expensive.
- Extra features – If you include extra amenities in the home such as a swimming pool, fencing or other landscaping features, your costs will drastically rise.
While there’s probably more costs you’ll incur when building, you’ll also get to enjoy a cheaper stamp duty compared to home buyers, and receive more grants.
So, is it cheaper to build or buy a home?
While our analysis suggests that building a home is generally cheaper than buying, it’s crucial to weigh the pros and cons of each option. The decision should not solely center on costs; factors like personal preferences, timelines, and long-term goals should be considered before making a final decision.