Difference in building and buying huge

2015-07-15 06:00
RENDERING of a luxury house.

RENDERING of a luxury house.

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THE latest findings from data collected by Absa Home Loans reveal that the difference of the costs of building and purchasing a house is considerate.

“For many South Africans, it is a dream come to true to design and build their own homes to meet their individual needs, in a style that best suits them.

“Unfortunately, the latest data from Absa Home Loans indicates that building a new home is just becoming too expensive, especially during this period of economic uncertainty and rising electricity costs,” explains Bruce Swain, managing director of Leapfrog Property Group.

“We are seeing demand for existing housing, especially in the lower end of the market (i.e. properties under R1,5 million), but new housing developments have become scarcer (save in a few areas) as construction costs soar.”

The data from Absa reveals that the average price gap between existing homes and new homes was a mere 1% or R9 500 in 2007 – based on a housing size of 80 to 400 m2. In 2014, that gap had increased to 30,5% or R458 000. The average price gap between new and existing houses is as follows:

) 2014: 30,5% or R458 000

) 2013: 35,1% or R615 000

) 2012: 34,5% or R553 000

) 2011: 31,6% or R478 000

) 2010: 27,5% or R386 000

) 2009: 20,5% or R256 100

) 2008: 11,9% or R128 400

) 2007: 1% or R9 500

) 2006: 2% or R16 700

During the first quarter of 2015, existing house prices rose by 7,2% year on year to R1 291 300 while the cost of building a new home rose by 3,9% to R1 869 400, making it R578 100 more expensive to build than to buy.

Jacques du Toit, a property analyst for Absa Home Loans, concurs that this disparity is caused by escalating building costs which he says has continued to increase faster than consumer price inflation in recent years.

“While prohibitive construction costs are good news for sellers in the short term X because more prospective home-owners will look to buy instead of build X the situation could eventually put too much pressure on the build market where buyers will struggle to find a home to buy and the cost of existing homes will become too high.

“As we are a growing nation that will need more property development, this situation can’t go on forever.

“It is my belief that the government and the private sector will need to join hands to make this more financially viable for new home owners,” says Swain

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