The Mortgage Supply Company

Building Rather Than Buying


Building rather than buying

There are a number of reasons to build a new house rather than buying an existing one, and a number of ways to go about it.

From the ground up

You might decide that instead of spending time house-hunting and hoping you find exactly what you’re looking for, you’d rather build a new house with everything done your way. This can be a great option, but it’s important to get an understanding of what you’re going into if you decide to build. New builds for home owners are exempt under the Reserve Bank LVR rules so building new can be a great option for first-home buyers who have a 10% deposit.

There are a few different ways of building a house, which all have their benefits and drawbacks. The most important aspect that lenders look at is whether the build has a fixed price contract or not. Banks prefer the certainty of fixed price over the alternative ‘labour only’ build – where the materials are sourced by the borrower and the builders are paid by the hour. Fixed price contracts help avoid cost overruns and lenders will usually be willing to lend a lot more.

House and land packages

These are usually part of bigger developments, where design and construction companies manage everything. You select from a range of build and design options offered by the developer and the whole thing is done for you, from consents to building to landscaping. You get some room to personalise the design and colours of your house within a limited range and the price is usually fixed, meaning it’s much easier to get finance.

However, you’re usually limited by the location of the development, which narrows down the choice of where you want to live. And although you have more choice than with a kitset home, there’s limited room for personalisation – which could mean you still don’t get exactly what you want.

Design and build from scratch

This is where you get to make your housing dreams come true. You create your own budget, and work directly with the architect, designer, and builder to create your own plans. You are responsible for everything – buying the section, getting building consents, and either managing the project or hiring someone to manage it for you.

This is naturally the most expensive way of building a house, usually takes the longest, and is most prone to delays and cost overruns. However, that could easily be worth the ability to live where you want, in a home that has all the features you’d like.

Kitset homes

These are popular as an easy way to build a new home. The kitset provides the plans and all the materials to build a house, down to the kitchen and bathroom fixtures. You buy a section and organise the build – getting consents, then hiring builders and tradesmen.

This is usually the cheapest way of building a new home, and you’re more likely to get a fixed price on the build. If everything goes to plan it can also be pretty fast – but there are a lot of ways that delays can crop up. The big downside is there’s almost no room for you to personalise your house, and you may be limited as to your location – the section you buy has to be suitable for the house you want to build on it.


There are a huge number of variables that influence the cost of building a house. You can make a very rough estimate based on the size of the house – a cheap build will cost between $1500-$2500 per square metre, an average price is around $2500-$3500 per square metre, and a luxury build could cost upwards of $5000 per square metre. These figures are very broad and there are so many influences on price you can’t make much of a guess without getting quotes or using a quantity surveyor to asses your plans.

Financing the build

We can help you find a lender to finance building a new home. If you have a fixed price contract with a builder, you are likely to need a lower deposit than if you’re working to a cost-plus contract.

To get finance you will usually need to have a full set of plans, building permits and consents, and builders’ insurance sorted out. You will also need a registered valuation of the project. The lender will release money at different points in the project, and may require ongoing valuations as the build progresses.

It’s very important that the points at which the lender will release money line up with the points at which the builder needs to be paid – otherwise you could see your build halted while you free up money.

A lawyer will be required to draw up the building contract, so it’s important that you get someone with experience in these kinds of contracts. Make sure you understand what you’re signing and all the potential snags.

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