Many people dream about building their own home from scratch, on some perfectly located piece of land and, perhaps, with a view that takes their breath away.
Some have a different vision and wish to just move into a brand new off-plan home, unspoiled or lived in by any other before them.
When it comes to finding a new home, weighing up whether to buy an existing property or build a new one can therefore be a difficult decision to make; do you take the plunge and build your own home or buy one off-plan, or look for a pre-loved home?
The answer, unfortunately, will probably come down to cost, and not dreams.
There are numerous factors to consider including location, customisation options, and long-term value, says Grant Smee, managing director of Only Realty Group. However, in a high interest rate environment, and with the rising cost of living, one of the most important considerations for many people will be which option is more cost-effective.
Analysing the costs involved in both buying and building a home will help you make an informed choice that aligns with your budget and needs.
“For instance, many people are opting to buy off-plan in an existing development. This way, you get a new build and save on transfer costs.”
Smee outlines the pros and cons of the three options – existing home, a new off-plan build, or your own build – below.
Which type of home will cost less?
Absa data reveals that, on average, building a new home from scratch is estimated to be 20% to 30% more expensive than buying an existing property. The average square metre cost to build a middle-class, freestanding residential house is R12,920, according to Procompare, an online site that connects homeowners with the professionals near them.
If you are leaning towards building your own home, Smee says you must also consider the cost of renting a property while waiting for the new one to be built, as well as the possibility of complications and costly delays throughout the construction process. These delays can also exceed your budget.
“The general rule of thumb is to factor in an additional 20% for breakages, delays, and cost escalations.”
Still, he points out that building a home offers upfront savings as it eliminates the need to pay transfer duty.
The cost of buying an existing home varies based on location and property type, with additional standard costs including bond registration and transfer costs, transfer duties, a deposit, potential repairs and maintenance, and home insurance.
“Buying a home provides the advantage of having a clearer understanding of the total cost from the start, enabling better budgeting.”
While buying off-plan does not require transfer duty, buyers will still need to pay VAT.
“However, this still works out to less tax than you would pay on an existing property, because a new development property is registered at the minus-VAT value,” Smee says.
Ultimately, it’s currently cheaper to buy than build.
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