Buy vs. Build: Homeowners’ $-Million Question (Explained)

The buy vs. build a house debate passes through everyone’s mind at some stage – the appeal of having a house tailor-made for you and your family vs. the stress and inconvenience.

Is it better to buy or build a house for you and your family?

The decision to buy or build a home depends on your circumstance, budget, and essentially how much time and effort is available to achieve your dream home.

Building a House

Do you have a secret dream house?

It is unlikely you will find the home of your dreams with the finish, style, and layout matching your expectations in an existing house.

The only sure way to get what you want with no compromises (other than technology or cost) is by buying some land and building your own house.

Advantages of Building a House vs. Buying

The top benefits of building your own house include:

• Building the dream – Every detail, every room exactly as you want it and to your exacting standards. When you create every detail of your house, you benefit from a higher level of satisfaction with your home.
• Building your own house can be cheaper – It can work out cheaper than pouring money into remodeling and upgrading an existing house to try to shape it into your dream house. Plus, you don’t have to live through the messy and painful process of having work done in your home.
• Eco-friendly and healthy – You choose the building materials, and you don’t inherit health hazards like lead paint, mold, and bug infestations.
• Lower utility bills – You can build in green power and energy efficiency from the start giving you less expensive utilities. Plus, it is all new and fresh, so you get a honeymoon period without decorating and extensive maintenance bills.
• Optimized design – You can take advantage of natural light, airflow and ensure that your windows have the best available views instead of inheriting the results of decades of redevelopment.
• You only pay for what you want – You don’t pay for unnecessary or redundant features. You may consider buying a home with a tennis court, but you hate tennis and need to rip it up and replace it with a lawn. Your house price reflects the value of the tennis court. Still worse, if it is a newly decorated house, you don’t get a reduction for hating the décor. You pay a premium for moving into a home you will immediately redecorate.
• Freedom from house buying chains.
• Higher resale value – Potentially, your beautifully designed and environmentally-friendly home will give you a more significant profit margin than reselling an older home.
• Lack of competition – There is no bidding war with a house you build compared with a home you buy. No one can top your offer and snatch the house away from you with all the disappointment and expense that loss involves.
• Builder’s warranty – Unless you buy a new house, your house purchase does not come with a guarantee against defects. It is a case of buyer beware. When you build your home, you get warranties from your contractors to provide you with a valuable safety net for any further work.
• You walk into a house that is a blank slate without the scars of prior occupation.

Disadvantages of Building a House vs. Buying

There are up and downsides to every activity, and there are disadvantages to building your own house:

• Typically, it costs more to build than to buy – There are exceptions where DIY home builders go all out to build a cheaper home. Generally, you can expect to pay more initially to build a house, but if you compare the cost of buying a house and remodeling it, the difference may not be that significant.
• You don’t have a fixed cost – When you deal with a construction project, you have a budget, but you can’t guarantee that event won’t push that budget up or result in you making compromises to save money. You can mitigate the risk by contracting for a fixed price, but things happen, and you may make design changes while building a house.
• A longer wait – It takes longer to move in because the house does not exist when you start the project. When you buy an existing home, you can expect to be arranging your furniture in weeks. When you build, it is a minimum of seven months and probably longer before you can move.
• There is more hassle and involvement – When you build a house, you need to engage professional help, financing, compliance with legislation, and solve problems until the house is complete.
• Landscaping takes time to grow – When you create a house, you need to create a garden to go with it, and that takes time for shrubs and trees to establish, including new lawns. You may need to import soil or spend years improving it.
• More stress for you – It is more stressful to deal with contractors, mud, transport issues, potential delays, and additional costs. By comparison, buy vs. build home means less hassle and time-consuming involvement.
• More complex financing – Unless you have vast cash reserves, you need a construction loan for the build process, and then you need to replace that with a mortgage.
• More complex legal documents – You want specialist professional help to avoid pitfalls and navigate the planning system.

Buying an Existing Home

Most homeowners buy a prebuild home because it involves less effort, but there are other advantages.

Advantages of Buying an Existing House

The main benefits of buying a home vs. building include:

• Convenience – You sort out your budget and then go and look at what is available. This route to homeownership is familiar and straightforward.
• Lower costs – Typically, it is cheaper to buy rather than build. There are exceptions, but generally, if you have a tight budget, it is more economical for you to buy an existing house – as long as you avoid making these homebuyer mistakes.
• You can move in quickly – Avoid the extra expense and inconvenience of cost and time overruns of getting involved with a building project. If you need a home soon, buying is your best bet.
• You get to move into an established neighborhood – A community and amenities await you. Sourcing land to build often means moving out of town as all the prime locations all have houses built on them.
• Avoid landscaping costs – The garden has matured with trees, flowers, and established lawns.
• You can negotiate a lower price with an existing home – the room for haggling with building your own home is strenuous and unlikely to be in your favor.

Disadvantages of Buying an Existing House

When you buy an older house, you accept that there are downsides:

• Compromise on your wants and preferences – you won’t find exactly what you want, and you need to make do with what is available.
• Competition for your preferred home – the house is on the open market, and you can lose out in a bidding war to someone with deeper pockets.
• Average to subpar conditions – An existing house may need renovation, or you may hate the décor. It means you will spend more on making it livable.
• Higher monthly costs – You may get lucky and find an existing house with energy-saving features, but generally, you expect higher running costs for utilities and maintenance.
• No warranty – you take on the house without a safety net, the appliances are old, and your heating system may break down the day after moving in. However, you get a warranty when buying a new build home.
• Potential health hazards – old materials, mold, dampness, wood rot, and insect infestations are all potential issues with an existing house.
• Used and abused -an existing house has suffered the knocks of having a family living in it. You can expect bits of surface damage like dents in the walls and woodwork, the odd cracked tile, and deep dirt in the carpet from another family’s feet and pets.

What to Consider When Building a House?

Building a house is not a small undertaking and will require careful planning and project management.

These are what you need to know when building your own home:

1. Legal Matters

The days of buying a plot of land and getting your neighbors to help you put up a house with no fuss or paperwork are long gone.

You need permits, licenses, and inspection certificates at every stage of the process.

It is best to have a clear picture of what legal hoops you need to jump through and which boxes you must tick before starting your build.

Engaging an architect (and understanding the best way to find an architect) for your new build home would be ideal.

2. Budget and Financing

Before you consider buying a plot of land and building a house, you need to think about the available funding; your budget must cover everything from purchasing land to the final finishes.

Unless you have cash available, you need a budget to convince a bank to loan you the funds for the construction. The cost of your build depends on what and where you want to build.

Your architect, project manager, or builder can help you create a realistic budget.

3. Design

Depending on your local regulations, you may be able to use a standard house building plan, but your life will be easier if you use an architect to translate your dreams into concrete plans and budget.

Depending on the interior styling, you may consider hiring an interior designer in addition to the architect.

4. Project Management

You can manage your house build project yourself and deal with contractors, suppliers, and planning departments.

Alternatively, you can pay a project manager or architect to oversee your project and reduce some of the stress by acting as a buffer between you and the building site.

It depends on how much time, money, and energy you have, but a professional will control the budget and creatively work around arising issues.

You can guarantee there will be issues during the construction because there are multiple risks with even the most straightforward build.

5. Timeline

Delays to your expected completion date are costly because you need somewhere to live while building your house.

Time overruns mean more rent and storage costs.

House building progresses along defined stages – land, land clearance, foundations, framing, dried-in, and fitting out. A delay in one stage has a cascade effect on the other stages.

6. Contractors and Suppliers

Depending on how much work you can do yourself, you still need to plan for some professional support for trades and labor.

You may contract with a builder who sorts out the material ordering and delivery, or you may choose to select suppliers that meet your quality standards.

However, if you decide to manage your project, you need the right workers and materials arriving on your site at the most useful times for your build.

You don’t want to pay an electrician to sit around waiting for the wiring and fittings to arrive.

7. Insurance

Although your contractors and other professionals will have insurance, you need to check the extent of their cover and consider anything you need to insure – public liability and delays.

It is worth talking to an insurance broker with specialist knowledge of house building to see what insurance is helpful for your project.

8. Communication

How are you going to stay on top of costs and progress?

You need to think about how you want to be kept in the loop – a regular progress report, site visits, photographs.

You can reduce your stress and contractor issues if you have clear communication protocols.

9. Average Cost of Building a House

The National Association of House Builders calculates the construction cost of an average family home at $237, 760 but that does not include buying and clearing the land (source).

These figure date to a survey in 2017, but the break down lets you see (approximately) where your money goes in a house build, excluding the land cost:

Work Stages	Construction Cost Estimate
Initial site work, fees, inspections, and plans	$16,000 (6.8%)
Laying the foundations	$26,000 (11.1%)
Structural framing	$41,000 (17.5%)
Exterior finishes – walls, doors, windows, roof	$33,000 (14.1%)
Electrical, plumbing, and HVAC systems	$33,000 (14.1%)
Interior finishes and fit-out	$68,000 (29.1%)
Landscaping and outdoor structures	$17,000 (7.3%)
TOTAL	$234,000 (100%)

The following is the average construction cost as a percentage of the overall spend when building a home, including the land cost:

Cost Components	% of the Overall Costs
Land cost	25%
Construction costs	60%
Design, insurance, permits, and misc. costs	15%

Note that land costs can vary greatly, depending on the location.

Construction cost is another component you can expect to see an increase year on year. For example, it was $85 per square foot in 2017, increasing to $114 per square foot in 2019 (source).

Is it consistently cheaper to buy or build a house?

As with so many things, it depends on the house you are buying or building.

You can usually buy a house cheaper than you can build it, but there are exceptions depending on where you live and what you want to build.

Is It Better to Buy a New House or Build One?

Developers have economies of scale when they build a new house, so if you are happy with the house style and available finishes, you save money by opting for a new build home from an established developer.

You avoid project management, hiring the architect, dealing with legal matters, and the risk of budget and time overruns.

You bet many of the benefits and fewer downsides when you opt for buying a new house.

On the other hand, if you have a strong vision of your ideal house, a developer appealing to the mass market is unlikely to give you the home of your dreams.

Is it better to buy or build a new home?

If you want a new house but have limited time and don’t want the hassle, opt for a new build house from a developer.

If you can afford the time, cost, and stress and desire a unique home, then building it yourself is an experience investing in the finished house with the magic of your journey from vacant plot to family home.

Is It Better to Buy or Build Your First Home?

For homeowners, the dream of building a home is undeniable. But when it is your first, should you still build or buy one?

If you can afford the costs and are prepared for the stress, building your first home will be a fulfilling experience not many can enjoy.

However, buying an existing home or a new build from a development company allows you time to understand your wants and needs in a house, so the home you eventually build fulfills your requirements in the long term.