Buy or build for yourself
While it is quite understandable that potential homebuyers will always ask themselves the question, Could I not be better off building my new home rather than buying a used one?, in the current highly competitive market that proposition is unlikely to be a good one, says Anton Du Plessis, CEO of the Cape estate agency, Vineyard Estates.
It is true, says Du Plessis, that some building contractors right now are coming in at prices that are close to no profit break-even levels but the material and labour costs at present make it exceptionally difficult to compete with homes that were completed a three, to ten or more years ago.
In certain cases, purchasers can achieve discounts of up to 30% on the replacement cost. Take for example a home that I sold recently for R8,7 million. The land value alone of this 1000m² erf in prime Upper Claremont position was close to R5 million.
The house itself, with over 500m² of floor area and world class finishes, would cost at least R15 000 per m² to build today if you could find the craftsmen. To create a house, garden and pool of the standard of this home would, therefore, cost R7,5 million today.
In other words, what we have here is a R12,5 million product selling for R8,7 million and that does not take into account the fact that a full year might be needed to design and get plan approval on such a home. There would be at least R500 000 worth of holding costs before the owner could move in.
Other good reasons for not being a building client right now, says Du Plessis, are that unless you are a skilful negotiator and have a good lawyer at your side, there is all too often a good chance that time and cost overruns will come as a nasty shock.
I am one of those who think that South Africas best residential architects are on a par with the worlds design leaders, but it has to be admitted that architects tend to lose sight of the end price in their determination to get a final product with which they are totally satisfied. It is also true that owners tend to underestimate the finishing, fitting out and furniture expenditure of a new house.
The old philosophy that genius has a right to change its mind and that all the best solutions involve changes along the way will often lead to expensive alterations and additions.
Any owner builder with experience will, therefore, warn you to budget for anything from 30% over the initial cost.
On the other hand, said Du Plessis, the pleasure and satisfaction of creating a home that exactly suits your needs and tastes can be a highly satisfying experience, whatever the frustrations experienced along the line. He added that if the client is building in an established area with mature gardens and leafy environments all around his site, his home will take on added value from day one. By contrast, a home in a newly developed precinct may take five years to gain a settled comfortable look and acquire real value.
This, he said, is why shrewd developers will spend 5 to 10% of their budget on landscaping and planting which, as we these days see regularly on certain projects, can involve the transplanting of mature trees.
Du Plessis said that in the suburbs where he is most active Upper Claremont, Kenilworth and Bishopscourt, prices have now stabilised and are showing a tendency to hold their value.
The price drops here were negligible by comparison to those of most other suburbs and as some 50% of buyers require minimal or no bond support, the sales pace has been well maintained.
Article by: www.chaseveritt.co.za