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Should I Buy A Brand New House Or Renovate?
●July 1, 2021●7 minute read
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Buying a house is a big milestone that many people aspire to achieve in their lives. With the Australian government grants and concessions available for first home buyers at the moment, it could be a great chance to seize the opportunity and enter the property market.
When weighing up whether to buy a brand new house or renovate an older home, it can feel like an overwhelming factor to consider before making one of the biggest financial decisions of your life.
If you’re working out which option is better, we discuss the pros and cons, the costs involved, and more below to help guide you in making the right decision for you.
Pros of buying a brand new home
Buying a new home is a dream for many people. It’s something that is all yours, and no one else’s before you, so you can completely make it your own. Plus, there’s a guaranteed knowledge that nothing bad has happened to the property prior to you moving in.
There are a few standout benefits of buying brand new over an older home, which we discuss below.
Promised end product
When you purchase a new property, you would have likely seen the home itself, been through a show home, or some guarantee of what it will look like. When renovating a home, there are some ‘unknowns’ about what the end product will look like, as things can possibly change. However, when you purchase a home brand new, you have a promised end product. Meaning, no surprises!
It’s no secret that while renovating has its benefits, it is also a stressful, time consuming process. Moving into a new home can mean you’ll have a much less stressful moving experience. This is because once the physically moving process is over, you can focus on settling in and meeting the neighbours, instead of starting the next challenge.
New home warranty
Most states and territories require a statutory new home warranty, which serves as protection against defects in work and materials, as well as structural defects and non-completion of works. The length of the warranty and contract amount that triggers the requirement varies. According to the Queensland Building and Construction Commission (QBCC), new home warranty is mandatory for work being done valued over $3,300 (though, as mentioned before, this can vary from state to state).
Less maintenance costs
In addition to potentially having a new home warranty, brand new homes typically require less maintenance costs in the first few years. While it’s not a guarantee, needing to fix a leaky roof, faulty water pipe, or other maintenance issue is less likely when everything is brand new.
Cons of buying a brand new house
There are also some cons that should be taken into account when considering buying a home that’s brand new.
Along with all of the benefits mentioned above comes the fact that buying a brand new house is going to be expensive. Factors such as where you buy and the type and size of the property can influence the price. Regardless of these factors, buying a brand new home means paying for a high quality home, so it’s going to be pricey.
Less room for negotiating
In line with being more expensive, you also have less room to negotiate the price you’re willing to pay. Especially if you’re buying off-the-plan, there’s typically a set price you’ll need to pay, and you won’t be able to negotiate the same way you could with a typical house sale.
Less customisation options
Buying a brand new property that you don’t plan on renovating means that what you see is what you get. There’s less room to make specific alterations to suit your lifestyle, needs, or preferences.
Pros of renovating an older home
Now that we’ve discussed brand new homes, let’s get into renovating. As mentioned, renovating can be a pretty big project, depending on the scale of the renovations you have planned. Firstly, let’s discuss the pros of renovating a home.
Cheaper initial cost
Buying an older home means that you’ll likely pay less for it in the initial purchase price. Depending on the age of the home, the condition it is in, and the renovations required, the price of the home will vary. However, regardless of the size and location, an older home will typically be cheaper than a brand new home.
Plenty of character
One of the benefits of renovating an older home is that the house has character. For example, an old Queenslander has features like high ceilings, timber floorboards, and other distinctive characteristics. You can keep some of this old school charm when renovating an older property, while still making it more modern and stylish.
When you’re renovating a home, you are free to make design decisions that are suited to your preferences, wants, or needs. Unlike buying a brand new home, you can make alterations to anything that you see fit. While you can do this with a brand new home, it somewhat defeats the purpose of buying brand new over renovating.
Increased home value
Another key benefit of renovating a home is the potential to add to the value of your home. In most cases, a successful home renovation will increase the value of your home.
“Flipping a house” is a common term used to describe the process of buying an older property and renovating it to sell for a profit.
37% of 1,000 Australians surveyed plan to renovate their homes in 2021. This demonstrates the popularity of renovating. Additionally, 89% of Aussies believe that renovating is good for increasing the value of their homes.
Cons of renovating an older home
Along with the benefits, there are also drawbacks that need to be considered when weighing up whether renovating is a good fit for you.
Whether you’re considering some minor alterations or a full home renovation, it’s likely going to be a big project and, in line with this, it’s going to be stressful. Things can go wrong, you can experience delays (especially if you’re hiring tradespeople to complete work for you), and it’s ultimately a massive job. Along with this will come stress.
In addition to being stressful, it’s going to be time consuming. Unfortunately, renovations take time. From four weeks to four months, and depending on the scale and budget of your project, you might not even be able to move into the property straight away.
Potentially, if you couldn’t move into the property straight away, you might need to factor in additional rent costs. Depending on the size of your family and location you need to live in, this can be a hefty expense to consider.
It can be expensive
It’s estimated that people spend, on average, $60,000 to $70,000 on home alterations. With this in mind, it’s important to ensure you have the cash available to make all the renovations you want to make, when you want to make them. Otherwise, it could end up taking longer than anticipated, and might not come out as expected.
Toxins in older homes
Sometimes, older homes can harbour toxins like lead and asbestos in the walls, which can be dangerous if not handled correctly. Make sure you ask your real estate agent about this prior to purchasing, because major renovations involving asbestos removal can come with a hefty bill.
To get a clear scope of renovating an older home versus buying a brand new home, we’ve summarised the pros and cons in the table below:
- Promised end product.
- Less stress involved.
- New home warranty.
- Less maintenance costs in the first few years.
- Expensive initial cost.
- Less room for negotiating the purchase price.
- Less personalisation options.
- Cheaper initial cost.
- Existing character of the home.
- You can personalise the home to your needs.
- Increase the value of your home.
- It’s stressful.
- It’s time consuming.
- It can be expensive.
- There might be toxins in the home that need to be handled properly.
Ultimately, it comes down to your personal preferences when making the decision to buy a brand new property or renovate an older one. But before you choose, there are some things you might want to consider to help guide your choice.
If you’re thinking about renovating an older house, ask yourself these questions:
- Is the cost of renovating going to be cheaper than buying a brand new house?
- Do I have enough time to sufficiently manage this project?
- Are there any restrictions on the home before I start renovations (e.g. heritage listings, structural considerations)?
- Will the renovations planned need a building permit and, if so, will it pass Council standards and regulations?
- Do I have the finances to complete this task?
- Am I going to be overcapitalising?
Did you know?
Overcapitalising means that you are spending more on the renovations than what the property is actually worth. Meaning, you are not getting the expected value out of the renovations.
If you’re leaning more towards buying a brand new house, you might want to ask these questions:
- Is the cost of buying a brand new house cheaper than the cost of renovating?
- Is the home going to suit all of my needs, now and in the future?
- Am I going to get added value out of the home?
- Will I have enough room to live comfortably (particularly if you’re planning on expanding your family)?
- Will I be able to maintain my current lifestyle after purchasing a brand new home?
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Written by Rachel Horan
Rachel Horan is a Content Writer for Jacaranda Finance. Rachel has previously produced content for Brisbane City Council, Black & White Cabs, and Clubs Queensland. She has a Bachelor of Mass Communication with Distinction from the Queensland University of Technology.