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Building becoming a cheaper option for people wanting their first home

With house prices surging, building a home has become a more attractive - and for some, a much cheaper - option for getting a foot on the property ladder. Matt Stewart reports.

Aiden McGillicuddy and Zoe Robinson gave up on the idea of buying a modest first home in Wellington after they discovered they could buy a section and put a new house on it for much the same price.

The twenty-something professionals realised the capital's property market had become "crazy" when they lost out on a tiny 1960s bungalow in the suburb of Newlands with a rateable value of $360,000, which sold for $550,000.

"We thought let's not do this again and started looking for land," Robinson said.

As luck would have it, they managed to pick up a section in the same part of town for $200,000 and drew up plans for a four-bedroom, two-level home with sweeping views of the capital.

To get the Government's $20,000 HomeStart first home builder grant they had to cap the build at $350,000.

After forgoing carpet for polished concrete and good insulation they planed to spend no more that $8000 on sewing curtains, basic landscaping and finishing the fourth bedroom and ensuite themselves.

The only downside to building was that it was more expensive week-to-week for a place you could not immediately live in, Robinson said.

"But it's only short-term and manageable if you plan well."

For years, the main factor stopping people from buying land and building on it rather than simply purchasing a house was the cost, Registered Master Builders chief executive David Kelly said.

But with house prices rising dramatically in many parts of the country, those who were once tentative about creating their home from the ground up were now much more sold on the idea.

"It's feeling like a far more attractive option," Kelly said. "There's definitely been a change in sentiment over the last 12 months."

Kelly believed the current strength of the economy, as well as rising house prices, was making building more viable.

"[People are] finally confident of their own finances, confident of their employment," he said.

"It's busy pretty much throughout the country. People talk a lot about Auckland but I just came back from Taranaki and Whanganui and [builders there] are also saying they're getting a lot of interest."

Whether looking to rent or buy, getting a roof over your head has become a costly endeavour in Wellington, as it has in many parts of the country.

The latest QV House Price index revealed nationwide residential property values increased 12.9 per cent in the year to March, up 0.6 per cent over the past three months.

Wellington had the fastest rise of the main centres, up more than 21 per cent. The average value in Wellington city is now $716,613, compared to $593,060 12 months prior.

Meanwhile, Trade Me figures show average rents in the capital have risen from $440 a week in 2010 to $520 in 2017.

Recently, Wellington City Council has seen a bump in the popularity of building. It issued a record 1204 consents for new dwellings or sections in the city over the last six months of 2016, compared to 788 in the 12 months before that.

Gerald Parsonson, director of Wellington's Parsonson Architects, said building could definitely be cheaper than buying, regardless of whether you used an architect or a building company.

"We get asked this question all the time by all sorts of punters. But it depends, you've got to do your homework," he said.

"Going with a building company can reduce costs to a bare minimum for a standard design. While using an architect will cost more, it will give the owner a more distinctive home that will likely be worth more if it is sold."

First-home builders in Wellington also have extra incentive - they will receive a $5000 rates rebate from July.

Nick Goodall, a research analyst at property research firm CoreLogic, said this, alongside HomeStart grants and potentially looser loan-to-value ratio limits, certainly made building in Wellington a viable option.

"As with any property wish-list you have to weigh up each factor as it is important to you. With a new build you might have to live further from town, but closer to town you may be buying an old house that requires more maintenance."


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Topics: Values / Prices

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