Jacques du Toit, Senior Property Economist of the Absa Group, considers the advantages and disadvantages of building or buying a house.
This is the second article in a series of three, which looks at building a new
house versus buying an existing house. In the previous issue the historical
trends with regard to new and existing housing in South Africa were analysed,
focusing in on various indicators such as building statistics, building costs,
size trends and price developments over the years.
This article outlines the various advantages and disadvantages to be considered
when building or buying a house.
Building a new house
Designed and built according to owner's specific needs and preferences.
Own choice of fittings and finishes.
New and modern fittings and finishes.
Low initial maintenance.
Modern architectural design in line with the latest trends in
The positioning of the house, garden, pool, lapa, paving and other
structures on the stand, taking into account wind directions and personal
Housing in the immediate area may also be new, modern and of the same
architectural design, which may create a feeling of coherence in the
A one-year roof leak warranty from a building contractor registered with
the National Home Builders Registration Council (NHBRC).
A five-year major structural defect warranty from a building contractor
registered with the NHBRC.
When buying from a developer, value-added tax (VAT) and transfer duty
are normally included in the price.
Uncertainty about the quality of workmanship and material at the time of
Uncertainty about the duration of construction and final date of
delivery owing to possible weather, material, equipment and labour
Location may be a disadvantage as many new developments and vacant plots
are on the outskirts of the major urban areas, which often is the only
location where suitable land may be available. These areas may be far from
places of work, shopping centres, public transport and schools. Traffic
congestion and time spent on the road may be regarded as a drawback in this
regard. Security in remote areas may also be a concern, which may lead to
higher-than-normal insurance premiums.
The future development of major arterial routes, adding to levels of
noise pollution and the development of low-cost housing or the formation of
informal settlements on vacant land in the near vicinity may cause property
values to stagnate or even decline.
Relatively small stand sizes.
If it is a new area, vacant stands in the vicinity may create a security
risk. There may also be uncertainty about the type, design and size of
housing that will be erected on these stands, which may influence property
values. Aspects such as privacy and views may be compromised by the building
of a new house and other structures on adjacent stands.
Additional expenses with regard to services provided by an architect or
engineer, and land preparation and excavation, with unforeseen ground
formations, need to be taken into account before the start of construction.
Banks are reluctant to provide finance for owner-built housing and
insist on the use of an NHBRC-registered building contractor.
Buying an existing house
The structure, fittings and finishes can be physically inspected for
quality, defects and poor workmanship before buying.
Expert opinion is available if there is uncertainty about the structural
aspects of a property.
Renovating may be worthwhile if the property can be bought at a
If the property is in an older, established neighbourhood, it may be
near major arterial routes and amenities such as central business districts,
shopping centres, schools, places of work and public transport.
There is less chance of stands still being vacant in the area, which is
an advantage with regard to security and the level of insurance premiums.
Certainty about factors such as privacy and views, as well as the type,
size, age and condition of other properties in the neighbourhood, which may
have an influence on current and future property values.
The average land area of older properties is larger than that of
newly-built properties, which is a positive factor for people wanting
sufficient space for their children to play or wishing to add on to existing
The average total building area of older houses, including the average
size per room, tends to be larger than in the case of newer houses.
The seller of an existing property is usually obliged to provide the
buyer with an electrical compliance certificate. The seller normally pays
for the cost of any repairs to the electrical installation.
An existing property is sold voetstoets without a warranty.
The price of an existing house excludes transfer duty payable to the
state. Although transfer duty rates have been substantially cut in recent
years, transfer duty may still add up to a sizable sum of money, depending
on the value of a property. Currently, in the case of an individual, no
transfer duty is payable on a property priced at up to R500 000, whereas, in
the case of a R2 000 000 property, transfer duty of R105 000 will be
Architectural design of the house, fittings, finishes and other
structures may not be in line with the latest fashion trends and personal
The positioning of structures on the stand may not be optimal with
regard to wind directions, or not be according to personal preferences.
Visible wear and tear may require major repairs to or total replacement
of fittings and finishes.
Renovations may prove costly.
Uncertainty about the condition of security, plumbing, sewage, pool,
irrigation, and gate and garage door automation systems, which may break
down unexpectedly, cause a security risk, and which may be expensive,
disruptive and time-consuming to repair or replace.
Owing to the age of fittings, finishes and the abovementioned systems,
running costs may be high owing to frequent maintenance.
An overgrown garden may have to be cleaned out and the rubble removed,
with the possibility of having to establish a new garden and irrigation
system from scratch, which may have huge cost implications.
Old, dilapidated and deteriorating properties in the area may have a
negative effect on the current level of and future growth in property
The next article will focus on the various aspects that should be kept in
mind when building a new house or buying an existing house.