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    Historically low interest rates lured first home buyers in, but as house prices escalated daily, homeownership went out of reach for many.

    It’s made a lot of Kiwis turn to an alternative: building. But with the current materials shortage and land prices steadily increasing, is it any more accessible?

    Here’s how the finance works out – whether you build or buy.

    Build new – financial pros

    Create instant equity

    When you build a home from scratch, you can tailor the design to the current market. Building a desirable, modern-day home will attract many prospective buyers when you decide to sell, meaning you’ll likely make an instant profit.

    Secure larger First Home Grant

    The First Home Grant for a new build is double that for an existing home – meaning you could get up to $10,000 per person. If you’re applying with someone else and you both qualify, you’ll get $20,000 towards the cost.

    Enjoy lower maintenance costs

    A new build comes with modern building standards. That means you’ll get a home with better insulation, more energy efficiency and generally lower maintenance costs. In the long run, this could save you a lot of cash compared to buying an existing home – where repairs are at least a yearly occurrence.

    Build new – financial cons

    Pay increased material costs

    Since the pandemic, factories around the world have been forced to shut. It’s caused material shortages, increased costs and huge shipping delays – with some builders waiting more than six months to get materials. The cost of some building supplies, particularly wood, could go up a further 35% by the end of this year – which significantly increases the overall cost of building a home.

    Risk dealing with loose budgets

    You’re relying on a building company to deliver a quote and stick to it. This isn’t always the case – and the end-cost could quickly escalate to much more than you budgeted for. When you’re buying an existing home, you know the total cost of the purchase as soon as the gavel hits the table.

    Expect move-in day delays

    When you buy an existing home, the move-in date is settled as soon as you’ve signed. With a new build delays are common, which could push your move-in date back weeks – or even months. That could mean you have to finance alternative accommodation until your new home is ready.

    Face expensive section prices

    Building new might not be an option if you want to live close to the city. Urban sections are hard to come by and if there is one available, it’ll be expensive. Even sections in more rural and suburban areas have risen a lot in the last year, making it tough for buyers to get their foot on a paddock, let alone through the front door of a home.

    Buy existing – financial pros

    Secure First Home Grant

    You may be entitled to a First Home Grant, which could be up to $5000 towards purchasing an existing home. This is a great incentive, although it’s half the amount you get if you build or buy a new home.

    Enjoy a prime location

    In our country’s main cities, there isn’t much room left for new developments or builds in highly desirable suburbs. Homes in these central spots are sure to hold their value for many years to come – meaning an investment will see you reap huge financial rewards. A build in a new suburb with less character doesn’t offer this same reassurance.

    Benefit from space and character

    While an existing home might come with higher repair costs, it’ll also have much more character and space – two things that sometimes can’t be achieved with modern homes on small sections. Space – even a small backyard – is harder to come by, which could push the value of your home up.

    Enjoy more wriggle room

    When you’re buying an existing property, there’s more chance of grabbing a bargain if the vendors need a quick sale, or arranging a settlement date to perfectly suit you.

    Buy existing – financial cons

    Face unattainable prices

    In many places in New Zealand, house prices are currently through the roof – they’ve risen 25% in the last year alone. For some people, particularly those not already on the property market, it’s put buying a new home completely out of the question – and even getting approved for a loan difficult.

    Expect costly repairs

    The obvious downside to many older homes is that they come with huge maintenance costs. In the long run, that could create a pretty big dent in any profit you’d make. Plus, they’re often not sufficiently insulated, meaning more expensive power bills.

    Endure renovation costs

    If you buy an existing home, you get what you get. It’s unlikely that any home will tick every box on your dream-home list. If you’re planning renovations to your new home – whether for aesthetic or practical reasons – the costs will quickly add a large sum to the purchase price.

    Build or buy? You decide

    Whether you build or buy a home, there are pros and cons to both options – and deciding what is the cheapest isn’t in black and white. It comes down to what you value most – and what your long-term goals are. If you’re looking to buy or build but aren’t sure where to start, contact the team at Global Finance today – we’ll help to get the ball rolling on your homeownership.

    **These are general guidelines and are by no means a reflection of bank or lending policies