Buying vs Building – which is more financially viable?

The FNB Property Barometer for 2019 indicated a low 3.7% year-on-year growth in Feb this year, compared to the 4.2% year-on-year CPI for the same period and the 3.8% annual average recorded in 2018. This slow growth coupled with a potential sentiment boost following the recent election results, might lead to a buyer’s market emerging across the greater part of SA.

This is according to Sheldon Jennings, Architect and founder of Archimedes Design – an innovative architecture practice in SA, who says that the first consideration for first-time home seekers should be whether to buy a pre-existing home or take up the challenge of building a tailor-made family home.

“Selecting the most financially viable option that can also serve practical lifestyle requirements is usually a deciding factor for first time home-seekers looking to acquire a family home. Unfortunately, there is no cut and dry answer when it comes to deciding whether to build or buy. From city to city the cost of construction and land vary vastly, and one needs to decide on a case-by case basis.”

Jennings identifies the following pros and cons for each of the options:

Buying a property

Purchasing a property could yield less unforeseen costs, provided that a comprehensive property inspection is conducted prior to the offer being made. Think about it as if buying a second-hand car versus a new car. As is the case with purchasing a second-hand car there are many hidden expenses that might creep up down the line, such as maintenance on individual elements that have suffered wear-and-tear. Common examples would be broken or cracked tiles, corroded roof sheeting that cause leaks and even foundation settlement that may compromise the structural integrity of the building.

Buyers must also be very sure to scrutinise the council approved building plans – which should be provided by the property agent – against the existing structure on the property. In some cases, the current owners may have added a bedroom, entertainment area or second dwelling without attaining the necessary council approval. In these instances, the new owners may be liable for hefty fines of up to 100% of the building costs of the illegal structure and in worst case scenarios where local building regulations were not adhered to, council has the right to issue a demotion certificate for illegal parts of the building. As most buildings are sold voetstoots in SA – costs that arise as a result of these penalties will likely fall on the shoulders of the buyer alone.

There are several property inspection firms in SA who conduct these pre-purchase inspections, but Jennings advises going with a firm that employs professional architects or engineers to ensure that the inspection is of the highest quality and to provide credibility, should the buyer wish to utilise the report for a potential discount on the asking price.

On a more positive note, a key benefit of buying a ready-built home is that you don’t have to go through the many stresses and the extended timeline generally associated with building. From transfer of property to council approval, the timeline of the entire construction process can easily exceed six months and can take even longer if unexpected hick-ups arise.

For individuals who are not prepared to go the extra mile and who do not have the time and capacity to invest in the construction process, it may be better to opt for buying, which generally concludes in under six months and where you essentially pay a team of advisors and professional consultants to guide you through the process and perform a lot of the admin on your behalf.

Building a home

Jennings explains that while a key benefit of building a property is the autonomy it offers the purchaser to create a truly novel and tailor-made space for his / her family, the process is not without its own pitfalls.

When building there could also arise unforeseen costs, such as special levies that apply depending on factors such as elevation above natural ground level, or if a second dwelling will be added to the property for example. Many first-time developers forget to add some hidden fees into their initial cost estimate. While they may have accounted for the professional consultants’ fees such as the architect, engineer and the construction team – they might neglect crucial items such as the geotechnical survey, (which helps to establish the subsurface soil and water conditions that influence the structural design) or development levies payable to the city.

Another hidden issue to be aware of is the potential for subsurface boulders that may need to be removed at great expense and effort. Additional elements that contribute to the cost of construction – such as steel reinforcement in the foundations – might also need to be added if the soil is found to have a high clay and water content following a geotechnical survey.

On the other hand, a Geotechnical survey might reveal ideal building conditions and therefore lessen the overall expected cost of construction. When building with a qualified team the client can at least have peace of mind that the building’s structural integrity is intact and that there are no hidden flaws or latent defects that will plague them down the line.

It is therefore always advised to consult with an architect before purchasing a piece of land to develop. Remember that the home you envision is not always possible. Elements such as height restrictions, boundary lines and aesthetic finishes are usually determined by the local council and it is important to be aware of these in order to have a realistic idea of what the finished product you envision on your new piece of land will look like.

Jennings advises that many architecture practices, including Archimedes Design, waves consultation fees if the buyer decides to continue with the purchase and appoints the firm for the design process. If the buyer is seriously considering a purchase it is a worthwhile exercise to ensure that the right decision in made, with all the right information at hand.

He concludes that building a custom design that is tailored to your family’s unique lifestyle requirements is usually a bit more effort, but it can be very cost effective, and it is usually worth it.

“One thing is for certain, if a client is willing to go through a little extra effort, one can create a unique space to enjoy with friends and family that need not cost as much as purchasing a pre-existing home and renovating. More often than not we see greater long term satisfaction with a home that has been built specifically to cater to a client’s need, rather than a purchased home.”