Your dream home: Buying vs building

NO SALE: TI buy or to build: the options are complex, and the pros and cons more so.
NO SALE: TI buy or to build: the options are complex, and the pros and cons more so.

As New Zealanders sleep, sordid visions flit through their fevered dreams.

Sturdy, strong walls that go all the way down. Mysterious recesses, hidden deep within vaulted ceilings. Luscious parquet flooring, firmly reassuring beneath the feet.

Home ownership has long been the New Zealand dream, and many of us are turning that fantasy into reality.

According to Reserve Bank stats, the number of home loan approvals in the past year was almost 5 per cent higher than the previous year, and almost 7000 made new applications in one week recently.

Although residential housing construction has been subdued in both New Zealand and Australia since the global financial crisis, housing consents here rose 8.3 per cent in January.

Assuming you can elbow your way through the crowded property market, what price is worth paying for the perfect house of your dreams?

To build, or not to build – that is the question.

Buy an existing home and the choices range from scungy "DIY dream" do-ups to pricey modern houses that just fall short of the dream.

Build, and you can have an architect-designed house customised to your life, or settle for a bog-standard piece of brick'n'tile suburbia.

Each choice has its own unique pros and cons. But before getting too caught up with the nitty-gritty, let's get the most important question out of the way:

IS THE PRICE RIGHT?

Buying old stuff is almost always cheaper than buying new stuff. But plenty of people are happy to pay a premium for the house of their dreams, so let's see how big the gap really is.

Comparing apples with apples gets a little tricky here, so for the sake of simplicity we'll stick to three-bedroom houses.

About half the cost of starting from scratch is the bare land.

That's out of your control to some extent, but building costs – which vary by at least $100,000 – aren't.

According to the Department of Building and Housing's handy calculator, a standard 150-square-metre three-bedroom house costs an average $268,050 to build in Auckland, as of July 2011.

The cost efficiencies and pre-planned convenience of cheap and cheerful "group homes", as advertised by a plethora of catchy TV jingles, knock a whopping 21 per cent margin off that price.

That estimate is supported by real quotes from the likes of Jennian and Signature Homes, which offer some new three-bedroom homes as cheap as $210,000.

On the other side of the coin, an architecturally designed dream house is likely to add 20 per cent onto the building bill, pushing the price up into the $300,000s.

Somewhere in between the two lies the road less travelled: prefabricated housing. For many, this conjures memories of cheap, uncomfortable classrooms perched atop wooden piles on the school rugby field.

"That's where most people's first associations are formed," Pamela Bell says ruefully.

As chief executive of the industry organisation Prefab NZ, Bell is on a mission to change people's perception.

"It's not the cheap flimsy mass-standardisation of last century," she says. The term actually covers anything from small pre-nailed panels to fully assembled transportable houses, all of which are built indoors.

But enough prelude – what's the price like? A larger three-bedroom transportable costs between $250,000 and $300,000, though that varies hugely.

Bulk production creates some economies of scale, Bell says, but the real advantage is quality, not cost effectiveness.

To recap – buying an existing house is generally cheapest, followed by group built homes, prefabs and finally bespoke designs.

But that's not the end of the debate.

LOCATION, LOCATION, LOCATION

Want to choose exactly where to live, or be destined to a sad existence in the wop-wops, far from the realms of polite civilisation?

The advantage of buying is that you can usually get a property in a better location, says Andrew King, president of the New Zealand Property Investors' Federation.

"You can get closer to the city, where there aren't a lot of sections."

If you're building, you'd need to be pretty jammy to get a prime inner-city block, or even into a desirable suburb. You're more likely to find a subdivision or somewhere further from the city limits – which may suit some people.

But the obvious problem with building in a new area is that you don't know what the neighbourhood will be like.

You also don't know how ugly your neighbours' houses might be, or whether they are going to plonk them down right in front of your million-dollar view.

Buying wins this round.

PERSONALISATION

Everyone is a unique and individual snowflake. These days, most buyers turn their noses up at standardised floorplans, and even the budget house companies are offering some ability to tweak the designs.

That's the benefit of building, says ANZ's head of mortgages Sarah Berry – you can decide on every little detail without having to compromise, other than on price.

Yes, that means you get to direct the feng shui of the living spaces for optimal energy flow, and select the perfect shade of puce to stucco the walls with.

"You don't have to worry about any historical problems a house may have, and there's no need for renovations", Berry says.

But if you buy, it's going to take a fair bit of hunting to find your dream home, and even then it may well need some fine-tuning to get it perfect, which invariably adds up to more than you planned to spend.

MAINTENANCE

As a seasoned property investor, King knows all too well about the time and money spent on maintenance and repairs. One of the main advantages with building, he says, is you don't have to actually do anything to the house for ages.

All the fittings, paint jobs and assorted accoutrements are brand spanking new, and theoretically won't require replacing for a good while.

But an existing house – depending on its state of disrepair – might take a little more loving and dollars to keep things running smoothly.

PEACE OF MIND

Transitioning to home ownership can be stressful, but no-one wants premature grey hairs, rising blood pressure and stomach ulcers.

Berry reckons buying a home is probably the easier path to start with.

"It's usually a much faster process between finding a property and moving in", she says.

During a build, you'll have to deal with other stresses such as "managing contractors", as Berry tactfully puts it. Or as others might say, bloody hopeless builders.

New houses are renowned for blowing out past budget and past time frame.

If you want a degree of certainty, Berry suggests fixed-price contracts, which have a set price for labour and materials.

But the protracted and often painful building process is where prefabs start to come into their own.

"The thing that I believe the group builders and the prefabricated home businesses can offer is that certainty", Prefab NZ's Bell says. "Known cost, known time frame, known design."

She reckons Lockwood Homes, which is one of New Zealand's oldest prefab builders, slashes build times in two by using prefab techniques.

Another Kiwi prefab company, Habode, boasts 30 to 60 per cent faster build times.

And the final factor that can add to the stress of building is landscaping.

Buy an existing house, and you get an assortment of trees and shrubbery for free. Build on a bare block, and it's going to be years before you get the privacy or shade you might need.

CHOOSING YOUR CHIPPY

To avoid such drama, your company or builder has to be trustworthy, and the best way to determine that is on past form. If you're looking at group housing or prefab, which use standard designs, visiting a showhome is a must. Do your due diligence, and make sure there are no horror stories.

If you're hiring an independent builder, be even more thorough. Consumer Build, a collaboration between Consumer NZ and the DBH, suggests inviting at least three builders to tender. Make sure they are licensed on the DBH website, and be sure to talk to past customers or ask to see examples of their work.

And always be wary of going straight for the lowball quote – you get what you pay for.

DIY DREAMIN'

Back in 1986, King jumped head first into home ownership and property investment.

He bought a couple of one-bedroom do-ups, and after applying a fair bit of elbow grease, boosted their rental income from $90 to $140.

King is of the mind that for first-home buyers, getting a slightly shabbier home and adding value to it isn't a bad way to start out.

"It means you can get into an area or type of property which you perhaps couldn't afford if it was completely done up or brand new," he says.

Look out for a house that has good bones and a good layout, but perhaps has an ugly garden, needs a lick of paint or some fresh carpet.

"Those are the kind of things that can add a lot of value."

Put your own "sweat equity" in rather than hiring contractors, and you increase the value even further.

There's no clear winner in the buy vs build debate. If you're keen to keep the mortgage to a minimum and willing to put in some hard work, buying is for you.

But for those determined to build the home of their dreams, bespoke homes aren't the only option – building doesn't have to cost a bomb.

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