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Is it better to build or buy a house? Weighing up the options for your next home

Is it cheaper to build or buy a house – and what are the pros and cons of building versus buying? Which is the best choice: build or buy a house? With so many variables to consider, there’s no simple answer. It depends on the type of house you want, where you want to live, and how much it costs to buy or build in your area. And then there are the variables you can’t measure: how much time you have, your willingness to handle stress, and your appetite for risk.

You’ll also need to compare the costs when you decide whether to build or buy a house. That means looking at land prices in your area, working out your theoretical construction project costs, and comparing that to what you can buy on the local market.

With all these factors to weigh up, it might help to ask yourself a few important questions when you’re making the all-important decision on whether you should buy or build your own home:

How much does it cost to build versus buy an existing house?

The basic equation for buying an established property is: Cost of property + stamp duty. You can use our Stamp Duty and LMI Calculator to give you a more accurate picture of the total cost of buying (don’t forget that first home owners can get concessions on stamp duty costs).

For building a house, the basic equation is: Cost of land + stamp duty + cost of construction. Stamp duty will be much lower than on an existing house because you only need to pay stamp duty on the land. So you’ll save money there. Typical construction costs could be between $1500 and $4000 per square metre, depending on the size and type of house you want to build.


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What is the most budget friendly type of house to build?

Before you buy an established house or start the building process, you’ll need to get a sense of the likely costs.


Once you have at least a back-of-the-envelope idea of the cost, you can compare strategies and think about what you want to spend. In many cases, you are likely get more for your money by building, but this shouldn’t be a decision based only on the raw numbers.


Here are some factors that help keep construction costs down:


  • building a basic house of medium size
  • using a reputable home-building company that builds from templates or offers fixed price contracts
  • a flat, easily accessible site
  • choosing a house and land package
  • being very organised with project management
  • not making any changes once the design is finalised
  • building outside the big cities (tradies’ rates are higher in the cities)

Of course, if you’re building your dream home, you might want it to be a one-off architecturally designed house with luxury features. That most likely would push up the costs considerably, especially if you’re building somewhere challenging like on a clifftop.


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Do you have sufficient time to build a house?

You can buy an established home and move in within a matter of months, or even weeks.


If you are thinking about buying a site and building a house, your move-in date could be years in the future. It typically takes at least a year to build a house, and if you’ve ever seen an episode of Grand Designs, you'll know that timelines could quickly blow out when issues pop up.

Are you prepared for the commitment of building a new home?

Anyone who’s built their own house may tell you that it can be stressful. When you buy an existing home, you can usually identify the problems before you buy it. When you build, unexpected costs and challenges can arise – whether it’s the site, the weather, illness, consents, the market conditions, or even a pandemic.


Uncertainties throughout the construction process could add extra costs or time to your project. Hiring a project manager can help with that, but it does come at a cost.


Do you want a house that’s perfect for you?

So why would anyone take on the commitment of building? Because in the end, you get the home you want in your desired location – and it’s brand new. It could be your dream house, or it’s tailored to fit your family’s needs. You might want to live in a certain area, in a home with specific features that fit your lifestyle – but you’ve been looking around the local market and there’s nothing that fits the bill.


Building a house could be the solution. You can choose the floorplan, the features and the fittings, so you get a home that works for your household. Maybe you want five equal-sized bedrooms, a utility room for washing the dogs and a music studio. Or perhaps you’re after a dual-access home where you and your extended family can share living costs but retain some privacy. If the house you want doesn’t exist, you might need to build it.


Even if there are similar houses in your area, getting exactly what you want is one of the main advantages of building a new home – and it’s all brand new.


New builds have low maintenance costs

Older homes to need more repairs and maintenance than new homes. You’ll also be facing high energy costs for heating and cooling since most older homes weren’t built with energy efficiency in mind.


In contrast, living in a new house can be a fantastic experience: warm, dry, quiet and energy-efficient. Lower energy bills, low maintenance costs, and a greater level of comfort. These are part of the reasons that make new homes so desirable for both tenants and home buyers and helps push up the value of a completed build project.


What could your new build be worth once finished?

Property values trend upwards over the long term, although they can go up and down in the short term. If you build a house, it may go up in value over the time it takes to complete your new home.At the end of building your new home could be worth considerably more than you spent building it, increasing the equity you could leverage as well as your Loan-to-value ratio.


How will you fund your build or buy?

Getting a home loan to buy an existing house is a well-known process. It’s one lump sum, paid out at settlement, which makes the transaction more straightforward. A home loan can be fixed to provide certainty of repayments and conditional approval (also known as preapproval) can provide you with some confidence in how much you can spend.


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When you build, the costs can vary and you don’t always know when payments will need to be made. The most common way to fund this is a construction loan, which allows for progress payments as the build goes along. A construction loan is tailored specifically to building or renovating, and as the project reaches its milestones, funds are released to meet the costs. This requires the builder and homeowner to work together to provide some paperwork and potentially pass inspections to ensure everything is on track. That allows the lender to check that the money is being spent as agreed.


Construction loans are typically divided into stages, with an interest-only rate in the early stages and without an option to fix. As the project goes along, the cost of borrowing increases as more money is drawn down and interest payments add up.


Learn more about construction loans and our construction lending options

Whether you're building a new home from the ground up or looking to start major renovations, a home loan with a construction loan option can offer flexibility and help keep costs down. Here's everything you need to know about how this handy home loan feature works. 

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Build versus buy: we can help you crunch the numbers

Should you build or buy a house? It’s a big decision. One way to help you weigh up your options is to have the best possible forecast of the numbers.


We can help with that. We can work alongside you to estimate your potential borrowing ability and borrowing costs for both building and buying. Add that to some research on construction costs, your local housing market and some hard thinking about your priorities, and you can feel confident in your possible decision about whether to build or buy.


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Things you should know

Credit criteria, fees and charges apply. Terms and conditions available on request. Based on Westpac's credit criteria, residential lending is not available for Non-Australian Resident borrowers. 

This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information to your own circumstances and, if necessary, seek appropriate professional advice. Credit provided by Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.

Key Fact Sheet for Home Loans