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New build or existing home?

Practicality, personality, price, and other considerations

Some people love the idea of a brand-new home – shiny new fixtures that you choose yourself, the layout and space you’ve always wanted, no worries about leaks or ancient pipes rupturing. Others prefer established homes. There’s the stability that comes with older buildings, character features with personality, and the reassurance of seeing your home before you buy.

If you’re torn between buying an existing home and building from scratch, it’s smart to consider the pros and cons of each choice. Both options have their upsides and downsides – it’s up to you to decide what you can live with.

Why most Kiwis buy existing homes

Buying an existing home from its previous owner is by far the most common way to purchase property in New Zealand. And it’s easy to see why – buying a home that’s already built is far simpler than buying land and building from scratch.

Here’s why:

See before you buy

When you buy an existing home, you get to walk around in the house before you make the decision. That means you know exactly how much space you’re getting, how it looks and how it feels before you put down a deposit. If you get a building report, you’ll also have an idea of any flaws in the construction before you move in.

Suburb selection

If you want to be close to the city, an older house is often your only option. Most land in central suburbs is heavily built-up, with few empty sections available for purchase. Established homes are also more likely to be in established suburbs, which means handy access to things like supermarkets, parks, and public transport. Although newer developments may include these amenities, it’s not always the case.

Personality plus

One less tangible upside to buying an older home is character and personality. Although you can inject your own personality into a new build, some people prefer the features and quirky details that come with older houses.

Set price

Buying an established home isn’t likely to be cheap, especially in Auckland, but you do know exactly what you’re spending. Once your offer or auction bid has been accepted and the contract signed, the seller can’t increase the price.

Move in right away

One clear upside to an existing house is that, well, it exists. This means, depending on the settlement date, you can move in right away without having to wait for construction to be completed.

The downside of buying an older home

Of course, buying an existing home isn’t always positive. Older homes can have issues and may be more expensive to maintain, which may make them less practical options in the long run.

Watch out for:

Expensive repairs

Older homes often come with built-in issues – older fittings in need of replacement, outdated kitchens and bathrooms, no insulation or heating system. These issues can seem minor when you’re first looking at a home but end up costing thousands later on.

What you see is what you get

When you buy an established home, you usually have to compromise on some of your desires. You might get the space you want, but not the garden, or you give up on finding a second living space. It’s pretty rare for an existing home to tick every single one of your boxes.

Older and smaller

In New Zealand, older homes tend to be smaller than new builds. Unless you’re lucky enough to find an expansive villa, opting for an older home might mean putting up with smaller rooms and a smaller floor plan. Because fashions have changed, older houses often tend to have layouts that don’t appeal to modern tastes. Of course, you can always renovate or extend, but that’s likely to be expensive too.

Why building new could be your best bet

Building a new home can mean buying off the plans in a subdivision or development, buying a section and designing your own house, or a mix of the two.

Here’s why it can be a great option:

Ticking the boxes

Building new gives you control over all the details. Even if you’re working from a pre-set plan, you can usually make changes to suit you. That means you get the features, layout, and space you need without having to settle for less.

Future features

New builds may lack personality, but they make up for it in practicality. Because building materials and standards have changed so much over the years, new builds tend to be far better insulated, warmer, drier, and more energy efficient. You can often choose to install features like underfloor heating and solar panels during the build, which can save you money in the future.

More house for your money

Unlike poky older houses, new builds tend to have larger floor plans and more spacious rooms. Many include second bathrooms, rumpus rooms, and larger kitchens. Depending on where you build and what you’re looking for, you may be able to get far more space for the same price as a smaller established house.

Extra cash from KiwiSaver

If you’re thinking of buying a new build as your first home, you could benefit from KiwiSaver’s Homestart grant. Designed to encourage new builds, the grant is doubled for first home buyers building from scratch – if you’ve been contributing to the scheme for at least three years, you could get up to $10,000 toward your deposit.

The risks and costs of new builds

Because new builds rely on builders and developers following through, they can be risky and expensive. It can be harder to get a loan for a new build, and costs can skyrocket during the construction phase.

Here’s why to think carefully before choosing to build:

Building takes time

Building from scratch obviously takes time – six months to a year is common, depending on the type of build and the developer responsible. If you buy in an upcoming subdivision or development, you may also have to wait for all the units or sections to be sold before building can start. While you wait, you’re spending money on rent.

Complicated construction loans

Even if you’re approved for a standard mortgage, you may not be able to get approval for a construction loan. This type of loan is far more complex than your average home loan, with extensive paperwork, payments in stages, and approval required at multiple points during the build. Some lenders require higher deposits for construction loans, which can limit your borrowing options.

Rising costs

Construction is notoriously expensive, particularly in New Zealand. When you build a home, you generally sign a contract before you start, but this does not always guarantee a fixed price. Even if you’re told a price in the beginning, costs can rise during the build if extra time or materials are needed, if the cost of materials goes up, or if some parts of the build were not included in the initial estimate. If you make changes to the original design, this can also cause the cost to skyrocket.

Talk to the experts

Whether you’ve fallen in love with a rustic older house, or you’re set on a brand spanking new build, it’s important to get your finances in order before you buy. That’s where Global Finance comes in. Our team of mortgage brokers knows the ins, outs, pros and cons of every type of mortgage – from simple home loans to complex construction loans. We can help you sort out the details, avoid the pitfalls, and find the right loan for your dream home. Talk to an adviser today.