Homeownership – Build or buy and renovate.

The question frequently asked is “should I buy a stand, build my dream home or buy one and renovate”. This is no contest as there is no right or wrong answer. A fact of life is choices are made based on personal circumstances as such there is no one size fits all package. I will share the pros and cons, dos and don’ts for both options and ultimately the choice will belong to you as you will live in your house.

Vacant stands are mostly available in the outskirts of cities or some relatively underdeveloped neighborhoods as such cautious approach is required before buying, as the area may never get to be fully serviced or title may never be issued. This ultimately will impact on the final value of the property as the location of a stand has a huge bearing on the final value of the property, the type of property to be built.

It is important to note upfront that building is a function of cost whereas when buying an existing property, the price (value) is controlled by the size of property, location and market fundamentals. When buying an existing property, the agreed price is final. Construction to some extent is uncertain as unexpected costs crop up and result in budget overruns, raising the risk of creating incomplete structures or substandard finished properties. Unforeseen yet substantial costs include boundary walling, paving, landscaping, standby power, security (electric fence, CCTV, alarms) etc, costs that are not directly related to the building of the actual house. In a nutshell, buying an existing property is thus a known and fixed quantity while building is not, as construction is a process that takes its time and has its own associated risks.

In some situations, the route that is taken by those who choose to build is they adopt the do it yourself approach, in the process becoming the artisan, foreman, contractor and consultant, cutting corners and wrongly concluding that it is cheaper to build than to buy an existing property. This unfortunately compromises on the final product, its value and marketability. Generally, construction costs per square meter are factual in as much a way the value per square meter is known. Houses do not come standard as we have varying sizes and types, i.e low cost and high end types of properties which cannot be compared. It may be worthwhile considering hiring competent people or firms to help ensure that the house is constructed to standard and to the expected value of that size, area and location.

A construction project requires design consultants such as Architects and Engineers who design and supervise the works and guarantee the final output. In situations where consultants are engaged, at times they are given free unguided role that results in oversized developments that are too costly and not related to the value of properties in the neighborhood. The way around this is to draw up a budget, get the designers to design around the budget and stick to the budget. The concept of value engineering takes center stage.

Tradesmen who put together the various materials have different experiences and their workmanship is never at the same level, background checks and references play a crucial role too in ascertaining the likely finishes to be achieved by an individual. In our market, there are also those that claim to do it all. Please ensure you get some checks to ensure the professional can deliver. It may be worthwhile visiting a few of their previous projects and talking to the Clients to get first hand information. The built environment professionals and firms are also licensed and getting proof for the registrations is a must.

Newly built properties usually have lower initial maintenance costs making it an attractive investment. The developer will also build to own taste to meet lifestyle and comfort. Existing properties are sold ‘voetstoets’ at times with invisible defects at the time of viewing which could end up costing a lot of time and money in repairs. Further, the design, layout and finishes may not be in line with one’s personal taste or the latest fashion trends and renovations may be too costly and also that they may result in overcapitalization meaning the improvements maybe beyond the market value of the property.

It’s not all doom and gloom when buying an existing property, the major advantage is that, what you see is what you get, one can obtain expert advice on existing structures if there is uncertainty about the structural aspects. Defects and poor workmanship can be inspected for quality. Some of the critical elements like foundations and structural elements are already covered and the defects can only be uncovered by expects. It may be worth investing in thorough professional checks. If a property is bought at a reasonable price, it could be cost effective to renovate giving it a fresh and modern feel. One critical factor about an existing house is that one can negotiate the price unlike in construction where one can compromise the final product through negotiated contracts as materials and the finishing will be compromised.

At the end let me highlight the aspect value, value and value. It is important to ensure that the buy or build decision is related to value. Even in situations of high end personalized developments, the construction or purchase value is important. For new development, remember at some stage the property may be sold, leased or disposed of and the value must be recovered. The built environment professionals must also be guided to ensure the product retains value or is of value. For new developments, value must cut across the structure. The finishes must fit the value. Avoid the usual dilemma where the projects start with good funding and the superstructure is sound. At later stages when the finances are used up, the finishes and fittings most likely get compromised. Fortunately or unfortunately, these finishes and fittings are what remain visible and attractive to buyers or of the property. Do not compromise on finishes and fittings!

When all is said and done, the engagement of property professionals guarantees success in acquisition and development, the cost associated with the process is outweighed by the benefits accrued in making beneficial decisions.