Most people looking to purchase a new property, whether they’re first homeowners, investors, or families moving into an area, have a choice to make. They can either build a brand-new home or purchase an existing one. Both options have always had their pros and cons, but in recent months, since about halfway through the pandemic, it has become much more appealing to buy an existing, already built home.
The reason for this is pretty simple: we have a construction crisis in Queensland and around Australia. Builders are going bust, wait times on homes are getting extended by many months and material costs have really sky rocketed.
Let’s take a look at why this is.
Reasons for the Australian Construction Crisis
The Federal Government HomeBuilder Program: This program from the Morrison Government was designed to boost the residential property industry during the pandemic. It did this by offering a $25,000 grant for new builds to eligible owner-occupiers. This did have the intended effect of increasing the number of new homes being built around the country. Unfortunately, other factors came into play that meant this rush would help send the industry into a bit of a spin.
Global Supply Chain Issues: The Ukraine conflict plus the confusion caused by lockdowns across the world caused serious supply chain issues. Huge backlogs in deliveries have hampered building activity, pushing finish dates of new builds further and further down the track.
Increased Costs of Materials: Raw materials for construction have seen huge upticks in price, led by a 42.1% surge in the price of steel. Timber is up over 20% and ceramic products over 12%. This becomes a problem because most building contracts that builders enter into are fixed cost. This means if the products go up in price, the builder has to cover that cost. This has greatly contributed to the number of builders going bust around the country, as they cannot afford to bankroll the price increase of their projects.
It all paints a pretty grim picture if you want to build a house in Australia. Not only is the construction time uncertain, but there’s a chance your builder could run into financial difficulty, which would affect the completion of your home.
For the home buyers choosing to buy existing homes instead of building, there are other benefits to enjoy. Let’s dive into those.
Benefits of Buying an Existing Home
Getting a Real Feel for a Property: The property is already built, so you get to enjoy a powerful first-hand experience of it. You can see if it works for you and your family, picture yourself living there and get a real feel for the layout and the size of the spaces. This is a much more experiential process than looking at some house blueprints and CGI images of an unbuilt home.
Location: Often newly built homes are far out of town where land is more plentiful. Land in more convenient areas closer to the city is rare, so the chances of being able to build there are slim. Buying a pre-existing home gives you much more flexibility when it comes to choosing a location that suits your new life.
Streamlined Process: As the house is already built, there are far fewer decisions for you to make when it comes to things like fixtures, fittings and design. There are also less hoops to jump through, with shorter times between signing contracts, settling and moving in. Compare this to the extended wait times for new builds to be ready and it’s easy to see the appeal of buying an existing home.
Character: Often new builds in a suburb just starting to get established will have a kind of ‘cookie-cutter’ feel to them. Designs and materials used are similar, which leads to new estates seeming a touch bland. Established houses are often more character filled, with established gardens and a homely feel.
We hope the above gives you some good information if you’re looking to buy a new home or add to your real estate portfolio. If you have any questions or would like to chat further about the Australian construction crisis or why buying an existing home is appealing, please get in touch with Henry. He’d love to help.
