Given that it is much more cost-effective to buy an existing home than it is to build a new one, South African home buyers should consider their choices carefully before buying a ‘second-hand’ home.
At one stage it was a reasonable option to buy an existing home and extend it to suit a family’s growing needs, or to buy a smaller property and make the necessary additions before moving in. These days it doesn't make much financial sense to buy something with the idea of adding on and buyers who are counting the pennies would be well advised to buy something that is suitable, for the short term at least.
In a report released by Chas Everitt, MD Berry Everitt notes that that the cost of building a new home increased by 4.3 percent in the second quarter of this year, following a 4.8 percent year-on-year increase in the first quarter. This, he says, has put the average nominal price of a new house at R1,535-million, or some 34,4 percent ahead of the second quarter average of R1,007-million for an existing home,
While those who plan to add on obviously aren't going to be faced with the entire cost associated with a newly built home, the building costs are still going to bite and if a buyer is considering adding on a new bedroom, bathroom or enlarging a kitchen space, they should, given the rising costs, be extremely wary of over capitalising on the property.
It may well be wise to factor in the costs of adding on to a smaller, less expensive home and invest in a somewhat larger, slightly more expensive property as this could prove to be the more affordable option in the long run.
No one should ever rush into a property buying decision and buyers should consider their needs carefully before investing. Trying to squeeze a family of four into a two bedroom home may not seem to be the end of the world, but living in a cramped space can become incredibly irritating very quickly and new homeowners may find it difficult to secure the extra finance needed to build an additional room.
Even if you have the additional funds needed to make the necessary additions, planning permission takes time and, given the rising costs, the project could end up costing far more than originally anticipated.
Unfortunately, escalating construction costs associated with newly built homes fuel prices in the second home market. This makes perfect sense as house prices are based on demand and it is pretty obvious that although very few people are choosing to build new homes, they are still buying property. To back up this point, Everitt notes that figures from StatsSA show that in the first half of this year, the number of building plans passed for new housing units was down by some 11,6 percent to 23 095 units when compared with the same period last year. Most of these will take approximately 18 months to two years to be built.
Anyone considering investing in a bigger home should bear these factors in mind and invest in a new property sooner rather than later.