IS IT WORTH BUILDING YOUR FIRST HOME NOW?

Make 2022 The Year You Start Your Journey As A First Home Buyer

With fears and uncertainties caused by the current economic conditions, I’m going to address the question “is it worth building your first home now?”

 It’s becoming a difficult question for more and more Australians as the current property market creates difficult conditions for first home buyers.

Now, considering that building your very first home is a huge decision and the idea of building it from scratch can be pretty daunting, it’s very important to make sure you’re doing everything with the right reasons and strategies.

In this podcast, I’m going to go over what causes all the fears, uncertainties, and doubts, I’m going to explain the benefits of building your first home and I’m going to tell you what I honestly think about building your first home right now in 2022. 

So, would I build my first home right now? First, let’s go to the current state of play.

The Inflation

Number one is inflation. Inflation is the rate of increase in prices. Now, there are few reasons why things are going up in price.

Firstly, the pandemic has hampered the global supply chains, which resulted in more products, especially construction and building materials, to increase in price.

Although a post-pandemic economic recovery can now be seen across the world and across different sectors as some restrictions are being lifted, the price increase of goods can still continue as demands are significantly increasing.

Moreover, the war in Russia and Ukraine is putting strains on supply lines globally, which is pushing the cost of everything up since the cost of shipping and transport mainly relies on oil and petroleum, in which Russia is the world’s largest exporter around the world.

Builders Gone Bust

The second thing is builders are going bust these days.

There are plenty of reasons why, but as mentioned earlier, the pandemic has caused increases in material prices, and the restrictions or supply issues have caused significant delays for project completion.

For instance, if a builder has signed a fixed-price building contract then suddenly the prices has gone up say 30% in the middle of the contract duration, it’s really bad for the builder and they are legally locked into taking on all these costs.

If they’ve got to pay an extra 20% or 30%, they’re actually not making any money. They’re completing the build but they’re losing money. That means they got a higher chance of going bankrupt whilst building your property, which is not good.

So these two factors are main things why there are doubts and fears among homebuyers.

The Benefits of Building Your First Home

Now I’m going to go into the benefits of building your first home.

Certainly there are disadvantages, but to balance things out, we’re going to talk about the benefits.

The major benefit when building your home now is you will need far less of a deposit.

Definitely, there are other benefits such as the fact that your new home is according to your plans and designs, but the major benefit is the one concerning finance because you need less of a deposit to build your first home than to buy an established dwelling.

First Homebuyers’ Help from Government

As a first homebuyer, there are few things you can access.

The first one is the First Home Owner Grant that’s been around for 20 years. In its current form, if you are building a new home valued up to $750,000, you may be eligible for a $10,000 grant.

Next is the New Home Grant. It basically means an eligible home buyer can purchase a home with as little as 5% deposit without the need to pay Lenders Mortgage Insurance (LMI).

You may also be eligible for exemptions, concessions or reduction from stamp duty for your property for a principal place of residence (PPR) valued up to $600,000.

So if you’re into buying land and construction and let’s say the land is $400,000 and the construction cost is also $400,000, since that’s below $600,000, you don’t have to pay any stamp duty on that, and that’s another massive benefit you get by building your first home.

Would I Buy a House and Land Right Now? 

So now let’s go to the question, would I buy a house and land right now?

Personally, if it’s me, I would want to wait.

Most of the time when it comes to first homebuyers, it is actually more beneficial to just go for it as soon as you can. But in this situation where there are too many uncertainties around construction, it’s better to wait.

What’s alarming to me is if I go through this process, then halfway through my build the builder goes bankrupt, that is going to be a big problem. I’ve got to find another builder that’s prepared to take on and complete the rest of the project.

Now that can also be very problematic since a lot of builders don’t want to do that because they’re not sure of the quality of work the previous builder has done on the property.

Also, a new builder is quite often worried about insurance, because all builders have insurance on the work that they do.

Another thing is it will be hard for me to budget. The problem is that we don’t actually know if property prices are going to go up. So unless you’ve got deep pockets and you can afford an extra say 20% or 30% on top of what your initial estimates are, then it’s better to wait.

Furthermore, the market’s not going anywhere.

We need to understand the environment where interest rates are going up, which means less and less people are buying.

With the interest rates surge going on, people are actually deterred from going on the market. So in my opinion, we’re likely to see drop in house prices in 6 to 12 months.

For those reasons, I would honestly sit tight and wait. At the end of the day, it affords me the time to go and save, save, save more money. When the time is right, you’ll be able to jump and go on with your plans.

So if it’s me, I wouldn’t be looking to build a house right now. But I would consider buying an established house where I wouldn’t worry much.

I know I just said that I think property prices are going to drop, but again, if I could get into that opportunity, I would because in the long-term, property value will increase.

So don’t try to time the market. Don’t wait for the bottom of the market to come because it’s a trap. If you can get into the property market and buy an established house, that’s what I would be doing right now.



That’s it for me for this week, guys. If you need help putting together a plan or figuring out what you can borrow to buy your first home, please get in touch with us here at Will Bell Mortgage Broker and we’ll be happy to discuss how we can get you into your first home.

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Will Bell

Will Bell

Will Bell has 15 years’ experience in the finance industry, the last 11 years he has owned and operated Will Bell Mortgage Broker. He specializes in residential home loans and over the years has carved out a trusted brand. This is proven by the reviews his customers have made regarding the service and the experience he has provided.

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