Should I buy now or build new ?
Ray White New Zealand
Source : Statistics New Zealand , Macrobond , ANZ Research
A return to more neutral market conditions means the gap is closing between the cost of buying now and building new . Ray White New Zealand investigates what offers the best value in the current market .
Too few homes and a rising population caused policymakers to implement initiatives tasked with making it cheaper , quicker and easier to build houses at scale and pace . However , building new has always come with a price premium , or so we expect .
Newly built homes in New Zealand typically offer a range of advantages over existing properties . They can be warmer , drier , more modern , and more comfortable . However , the perception of increased capital outlay , construction delays , and uncertainty surrounding new-build processes has tempered buyer appetites , particularly given the huge recent construction cost inflation .
IS THERE A NEW-BUILD PREMIUM ?
Buyers ’ perceptions of value play a crucial role in decision-making and , particularly , pricing for residential properties . Where some may covet a charming heritage home , others see a tally of ongoing maintenance costs . Despite subjective purchasing behaviour , building or purchasing a new home in New Zealand is generally more expensive than buying existing property for a variety of reasons .
Land cost is a significant factor in construction , with restrictive land use regulations and inefficient zoning blamed for making it too costly to create necessary new housing .
According to recent estimates from property analytics and services provider CoreLogic , new-builds in New Zealand are currently around six per cent more expensive than an existing property . This rate falls within the long-term historical average , providing a clear comparison of the costs involved .
The data , which has been recorded since 2002 , shows that this ‘ new-build premium ’ has shifted significantly in line with economic conditions , becoming cheaper in the years following the Global Financial Crisis ( GFC ) and rising to 15 per cent as demand , and the cost of materials , labour , and compliance soared around 2018 .
A complex variety of factors contribute to the cost of building new , including land costs , infrastructure investment , and policy changes which developers and home builders consider carefully in feasibility plans .
These features vary widely between locations , reflecting a need to keep abreast of council zoning permissions , accessibility considerations , insurance and risk factors when assessing comparative value .
TRENDS AND CONSIDERATIONS
Today , the residential sales sector is returning to a better equilibrium , driven by steadying financial factors , including an easing inflation rate and reduced forecasts for debt-servicing burdens . However , newbuild properties still require an additional cash injection compared to their existing counterparts .
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