Just wondering like they usually say that buy when the property market is down and sell when it is up (if you can catch either) BUT is there a good time to build ?
I was wanting to build a home now but was wondering of reasons that i should not … what factors might influence my decision of building -rising interest rates, rising building costs?
thanxHey Soum,
There are certainly reasons for and against. On the for side you have issues such as land is very difficult to gain an income from by itself so the mortgage you are paying (if you are) is not offset. There are options for income but are dependant on what and where the land is. Also on the for side is the increasing costs of constuction which is not showing any signs of slowing down. Bear in mind that house construction now tends to take longer than it did say 5 years ago due to labour and sometimes material shortages. Can take up to 12 months to build.
On the neg side, if you build you are obviously up for the construction costs, which are staggered over the building period. You may have to wear these additional costs for 12 months before you can rent or offload the property.
The questions you need to ask will include: what are you going to use the house for? POPR or IP? Can you currently afford the construction costs? Can you currently afford the land without revenue? What is the land worth now undeveloped or developed?
Just a few thoughts!
Soum,
Without sounding like a smart-****, one of the biggest factors that will influence your decision on whether to build is :
You actually have legal title over a block of land.
The reason I say this is that in your earlier, recent posts you were enquiring on what to look for on buying a block of land. Did you buy one ??
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Hi there,
I would say that it is not a good time to build. I would also look at whether there is more value in established homes.
In the first instance I would look at market value of the area where you are planning to build. Will the cost of building + interest be substantially less than established homes currently on the market? Make sure you compare apples with apples, ie size of home, location and quality. I would only build a new home if the final product was considerably cheaper than established.
If you were building for purpose of renting -tenants these days expect aircond, security system, retic this needs to be factored into the equation. Make sure this is included in the building package.
I have been researching same – Perth market and would say it is not a good time to build when there is a shortage of labour and interest rates are expected to increase.
RE agents I deal with are advising that there are too many new properties on the market and currently having a problem moving.
At the end of the day if the figures dont stack up…. dont do it.
Regards. M
[biggrin]
Hi Soum,
Are you building your PPOR or for investment?
The costs of building in Australia is greatly increasing due to the price of materials and labour. The rise and fall costs of materials are constantly moving upwards (1 to 1.5% every month for the last 24 months) and the shortage of skilled labour is forcing up costs as well. The price of iron ore is set to rise 70% which will have a huge effect on steel and other ferrous products.
The seasonal trends and shortages also have an effect on the building industry’s prices at a national, state and local level.
I am a builder and it blows me away at the increasing costs of materials, labour, insurances and equipment. I think eventually it will be a very wealthy and determined person who will be able to build for themselves. The level of skill in the industry is suffering and consequently the quality of workmanship is too.
The positive could be that the established house price may increase to reflect the replacement costs of that dwelling. As for deprecation on an old building-you can relocate a 100 year old weatherboard house to a new site, re-clad the roof and walls and claim deprecation as new. There are smarter punters out there than me who could really go to town on this one.
Good luck in your search.
JPD
According to todays AFR – there is around 15 billion dollars worth of building ‘in the pipeline’, however, new building applications / approvals have declined rapidly in the last 6 months. Once that 15b is complete, there will be an abundance of builders looking for work and less demand on materials. In other words, building will be significantly cheaper.
On the other hand, I’m nearing completion of a building almost identical to one two doors down which sold 2 weeks ago for exactly twice what it’s cost me to buy land and build.
So in answer to your question – now is an expensive time to build, but it is also an expensive time to buy an existing house. Do your sums, be conservative, base your decision on the facts.
Cheers, F.[cowboy2]I think the besting timing goes to the EDUCATED investors
Passive income:
http://www.unitoday.net/healthyjack/mystory_en.cfmI am looking to build my first home and almost convinced that i should build since what i want in established houses is more expensive than buying land and building the same house on it.
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