Should I Hold off Building My First Home ?

• 

  Trying2SaveABuck on 12/06/2022 - 23:28

  +3

  if i had a crystal ball i'd let you know….

  i guess the question you need to ask yourself is

  1. do you think construction costs will come back down or remain elevated or even worse continue to rise in the period you are waiting to 'start building'

  2. how long are you prepared to 'wait' till you start building ie 6m, 12m, 24m…

  3. what is the cost benefit of holding the land and renting opposed to living in a property after say a 6-12m construction

• 

  Pelicannn on 12/06/2022 - 23:33

  +5

  I'd be looking at the fact you are paying near 20k in rent a year. So do you think the build will be more than 20k cheaper in 12 months time? Or 40k cheaper in 24 months time etc.? Otherwise it seems there is little point to delaying.

  • 

    ForkSnorter on 13/06/2022 - 07:55

    +2

    I've heard the "rent is dead money" argument so many times it's not funny. I heard it for over 10 years when I was renting. "$20k per year down the drain", was the argument. In reality, I was renting an $800k apartment in a convenient, yet peaceful location with an amazing view for about $20k yer year, and I got a flatmate in one of the bedrooms paying $220 per week, so I was only paying $180 per week myself.

    The people who made that argument were living in dreary properties in inconvenient locations with no view, endless road noise, and they were paying at least $10k per year in interest, $2k per year in rates, $1.5k per year on water, $1k on insurance, and several $k on maintenance, gardening, etc. With all these expenses, their mortgage was hardly going down at all.

    Nowadays the "rent is dead money" argument makes more sense, but for a long time it didn't. And, in some circumstances, it may still make sense to rent, especially with house prices so high and interest rates going up.

    • 

      Pelicannn on 13/06/2022 - 08:49

      +2

      I’d say in this instance rent is dead money to OP if the price of building a house doesn’t go down and they delay it for the chance that it does when they could just start building now.

      In my experience the right time for these sorts of things is never going to be known until after you’ve made the decision.

    • 

      Chandler on 13/06/2022 - 09:47

      +1

      I've heard the "rent is dead money" argument so many times it's not funny.

      The point is that when you finish renting, what do you have? When you finish paying your mortgage, you have a house.

      Renting does make sense in certain circumstances, and owning does have it's drawbacks. But considering I'm currently paying less per month on a mortgage than most renters pay per fortnight, I think we're doing pretty good. Obviously not all owners are in this position, and we'll see how much this changes with interest rates… Speaking of which, whilst owners have the drawback of getting affected by interest rate changes, so do renters; the effects on renters are usually delayed, however.

      • 

        ForkSnorter on 13/06/2022 - 11:27

        +1

        If you have a typical mortgage (~$500k) and you're paying less than the typical fortnightly rent, you'll never pay it off. And you'll end up spending hundreds of thousands of dollars in interest. Or, by the time you've paid it off, the condition of the house will have deteriorated to such an extent that it will require hundreds of thousands of dollars to renovate.

        • 

          Chandler on 13/06/2022 - 11:35

          @ForkSnorter: Good point, sorry. We put all our income in and withdraw living expenses. What I'm currently "paying" was just the interest figure and doesn't include any principle payments (remaining income). So the figure is likely much closer to typical rent.

          In any case, the initial premise of my comment still stands. Renting a house is like renting a movie: you don't get to keep it when you stop paying. As a buyer, I do get to keep it when I finish paying it off; and if I decide stop partway, I get to keep most of what I've paid off (assuming I "break even"), but until price houses start dropping significantly, I will likely receive more back than what I put in. (this obviously depends on when the house was purchased)

    • 

      ChiTown on 13/06/2022 - 10:53

      Yea…but what you're missing is the value of their properties IF they had land, not just apartments. Their properties are now likely worth at least double over that 10 year period when in comparison you have no asset at all…there is no comparison as to which is the better outcome financially.

• 

  Mechz on 12/06/2022 - 23:34

  +2

  It's not so much that prices will come down, but the availability of building supplies is very bad and delaying construction by months in some cases. Delays will cost you more money because things will get weather damage and have to be fixed before construction can continue.

• 

  [Deactivated] on 12/06/2022 - 23:39

  +5

  i would wait, keep renting for a year or two and see how the industry is then.

  so many people are trying to build right now, it will just be havoc.

  another bonus with waiting is that the companies that are going to go bust will have probably gone bust by that point, so you aren't out of pocket with some shady builder who either doesn't have the money, or has hidden it somewhere in order to avoid paying debts.

• 

  Sum-Ting Wong on 13/06/2022 - 00:31

  +2

  You can’t go wronga building in Wodonga

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  trustnoone on 13/06/2022 - 00:39

  +1

  Could you possibly add a granny flat in? then you can live there instead of paying rent. Once you're ready you can then build your actual home and then rent out the flat for extra $$$.
  Guess theres some cons to this though (approval, living next to building site, etc)

• 

  Euphemistic on 13/06/2022 - 06:44

  Build now. There’s no guarantee prices will drop, and even if they do you’ll make it back in 5-10 years.

  Just don’t overcapitalise and make it too big or gold plate everything. It’s a first home, make it modest and move up the property ladder in a few years when you’ve paid off a decent chunk.

• 

  ForkSnorter on 13/06/2022 - 07:43

  I'm not an expert, but have heard horror stories, with houses taking forever to be completed, lies and broken promises by unreliable builders, costs skyrocketing and some houses costing nearly twice what was initially anticipated to complete (when taxes, etc. are accounted for). If your block is in the bush, maybe just build an unapproved shack by yourself, that you can use as a holiday house. Would be fun to build, and much cheaper. Then buy yourself a cheap established house/apartment in an ok suburb. Maybe even look outside Victoria.

• 

  Leanne59 on 13/06/2022 - 08:03

  Buying an established house in 2023 or 2024 will have a huge cost of stamp duty on the transfer of over $30k compared to land and then construction costs, add that to the rent over the next two years. and see how it compares to building now.

• 

  garetz on 13/06/2022 - 08:08

  +1

  If you are risk averse then now is definitely not the time to build.

• 

  Youfah Mizzum on 13/06/2022 - 09:17

  +2

  OP, I'd be holding off building for all the reasons you mentioned.

  Use this time to research builders. Thoroughly.
  Get a nice floor plan, edit it, tweak & modify and search high and low for a trustworthy builder. That research time maybe a year or two so use the time wisely.

• 

  Presence on 13/06/2022 - 09:41

  +2

  I'd ensure the design was as simple as possible, nothing custom made at all, only 'off the shelf' size windows for example, and avoid as much as possible anything from overseas (like kitchen benches).

• 

  pharkurnell on 13/06/2022 - 10:47

  At the rate house building companies are going toes up - I wouldnt be handing over a cent right now.. its going to get worse before it gets better.

  YMMV

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  ChiTown on 13/06/2022 - 10:56

  By 'custom' do you mean fully custom? Or just customised…there is a big difference, a builder who's doing a full custom home for $550k, if it's not a small home then I'd be worried as that is too cheap. You could be in for a big surprise with the final cost of the build or the builder may go bust at that price point for a full custom home.

• 

  Almost Banned on 13/06/2022 - 11:19

  I wouldn't be surprised if you struggled to even find a builder to take the job on - and if you did they'd want to have a pretty good rise and fall clause in the contract.

• 

  verio on 13/06/2022 - 12:21

  I have some insights into this topic and I can tell you that it is a shitshow right now.

  Even if you start building now, there is no guarantee that:
  a) your builder will not do a price increase on your contract during construction
  b) your builder will not go bust during construction

  Nobody knows what will happen in the future. However, it is likely that prices are going to stabilize in the future (see timber prices in the US). They might not get cheaper but at least things should be more predictable.

  So yes, while you are "wasting" money on rent, you are also potentially saving yourself a lot of stress by delaying the build.

• 

  thord on 16/06/2022 - 12:17

  Unless you have a shed so that you can bulk buy all your materials right now and store them. I wouldn't. The predictions for future price rises are WILD and all over the place. Shit could jump by 200% EASILY.

• 

  Daniel Plainview on 17/06/2022 - 11:48

  Keep it simple.

  If you're that alarmed when things really haven't gotten that bad yet - and feel that the mix of feedback on OzB is your guidance - I'd hold off. I don't think building now will be a good match for your risk tolerance.