Understanding new builds

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Build new or buy an existing property? The thought of building a new house can be overwhelming so we'll give an overview of the build options below.

When looking into your options for buying a home, it’s worth taking into the account the benefits that a new build could offer. When you build, you’re more likely to get exactly what you want as the design and fit out of your home is a direct reflection of what has been discussed with you. You also benefit from the exemption that applies under the Reserve Bank LVR rules - homeowners for new builds only need a 10% deposit rather than the standard 20% you would otherwise need.

What is a new build and are there different ways of building a house?

House and land package, kitset or build and design from scratch – there is an option to suit your every new build needs.

House and land packages usually have a fixed price contract where you choose from different build and design options. It is an all-inclusive package where everything is done for you by the developer (including landscaping and consent requirements) otherwise known as following a turn-key approach. You will often hear a bank or lender refer to a turn-key process, which is the safest and most commonly financed package for new home owners choosing a new build option.

Self managed design: You choose the destination and create your own home based on your dream features, own budget and work directly with builders, designers and architects and are responsible for every aspect of the job. This means you are purchasing the section, managing all facets of the project, including obtaining consents and sticking to a budget you create. Depending on the level of experience you have with managing your own projects, you may find the amount a bank lends you to be less than expected or in line with your experience versus the risk of the project without a qualified project manager.

Kitset: This is the type of build where you are paying for the plans and materials required to build the property only. You will most likely have already purchased your land and are only needing to plan to construct your home with the necessary tools and materials based off the plans you purchase. You can work with the company you are purchasing the kitset property from to customise and to fit the land site you have.

What are the upsides and downsides?

One of the biggest downsides of new builds is that depending on what type of contract you are going for, most banks prefer the old fashioned turn-key approach, which provides certainty of a fixed cost and therefore unless going with this option, you may find that a bank will lend you less than the 80% you may need to complete your project.

The upside of building your own home is clear; from having the best fixtures and fittings, appliances and your very own architecturally dreamed design, to being able to depend on not having to do as much maintenance as you would naturally have to do with purchasing an older home. You will also likely have better insulation thus lower costs when it comes to your ongoing running costs such as power.

Costs and financing. How does this work?

There are a number of significant risks and influences to consider when it comes to building a new home. The cost to do so can be based on a number of factors, which include the size of the home, the level of experience of your project manager and the luxury brands you will be using to complete the process. Luckily, a lot of the costs can be closely estimated with the help of professionals such as quantity surveyors, valuers and by obtaining sufficient quotes when assessing your plans to and throughout construction.

You will need to obtain plans, building consents and permits, builders’ insurance and will need to understand the cost of the type of contract you have with your builder/developer.

You will also need a registered valuation for the project and often will require the project to be valued in line and on an ongoing process as the build progresses at each stage.

Legal and professional advice or support is always recommended, regardless of what experience you may have with building a home.