Is It Cheaper to Build or Buy a Home?

is it cheaper to build or buy a home

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 Home

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.

buying a house

Cost of Building a Home

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.

Enquiry Form