Which Is Cheaper? Building vs Buying A House In NZ

Date Nov 19, 2021
Blog category Broadband
By Tina M.
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Is there anything better than finally buying a house in NZ? It can be a ludicrous idea given how expensive New Zealand real estate is, but we really want to know which is cheaper: to build a house, or to just buy a ready-made one?

But with New Zealand's increasing house prices, it may take some time to buy or even build a house.

Aside from the price, there are several things to consider that contribute to the overall cost of getting a house. It's the location, distance to work and schools, and the history of the building that would appeal to a buyer's specific preferences.

Let's start with the arguably less stressful route for acquiring a home.

Buying a house in NZ is expensive (there's no denying that), but if you understand mortgages, savings, and KiwiSaver, you'll have a clear picture of how much you need to borrow, budget, and buy with the money you have.

What is the average house price in NZ?

In the REINZ monthly report this year, residential property prices climbed by 15.4% to $795,000 in September 2021 compared to $689,000 in September 2020. 

Region  Average House Price % increase since September 2021
Auckland $1,150,000 20.4%
Bay of Plenty $878,000 24.2%
Tasman $860,000 27.4%
Wellington $845,000 13.7%
Nelson $802,000 24.5%
Waikato $774,500 22%
Hawke's Bay $770,000 31.6%
Otago $695,000 18.8%
Canterbury $660,000 31%
Northland $650,000 18.2%
Marlborough $650,000 22.6%
Manawatu/Wanganui $626,000 35.4%
Gisborne $615,000 9.8%
Taranaki $535,000 10.3%
Southland  $437,580 29.1%
West Coast  $272, 000 10%

These prices may appear out of reach for first-time home buyers. To help you out, here are some friendly home-buying tips before you close that deal, let alone make an offer.

Read: Income Vs. Housing: How Can Kiwis Find The Right Home?

  • Save for home deposit - Preparation is key when making your initial deposit. For a $150,000 home, lenders require a 20% deposit to buy a house, or $15,000 upfront. So save for your upfront payment and focus on saving and budgeting for your monthly mortgage. This will increase your chances of approval and possibly inspire you to find other sources of revenue.
  • Compare market prices - Before making an offer, research comparable properties online. A property priced higher than others in the region may be a bargain.
  • Make an offer - The majority of the time, selling a property involves making an offer. Keep in mind that another or several interested buyers can make an offer, so it's advisable to seek legal advice and check with your bank before relaying how much of an offer you're putting in.
  • List down monthly household expenses - You should know your expenses before moving into a new home. Note down bills, electricity, groceries, insurance, and other expenses, including school fees. When you're ready, talk to your bank about how to apply for a home loan with your budget.

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How much does it cost to build a house in NZ?

Cost in building a house mainly depends on the materials, labour costs, size of the home or property and the project schedule. 

According to Quotable Value, the cost of building a home in New Zealand's major cities grew by 2% in 2020 and by 15% in the five years leading up to 2020.

Region Average Building Cost % increase since October 2020
Auckland $311,500 2.3%
Christchurch $309,750 1.8%
Wellington $287,000 2.5%
Waikato $287,000 1.9%
Dunedin $278,250 0.7%
Palmerston North $276,500 0.6%

Note: Average cost or estimation does not include the cost of the land, utilities, professional, council and legal fees, balconies and covered ways, external works such as driveways, parking areas, and landscaping, demolition of existing structures, additional costs due to building code changes, and GST.

Every site is different, and the cost varies according to location. The best course of action is to hire a quantity surveyor to give a detailed cost estimate based on your architect's plans (if you do get an architect for your home).

Read: How Much Is The Average Grocery Bill In NZ?

How much does a house cost per square metre in New Zealand?

The average price per m² this year climbed by 8.5% to $2,428 from $2,238 in 2020.

Meanwhile, the average price of a newly constructed house has dropped from $428,791 in 2020 to $378,307 in 2021, due to a significant decrease in the size of homes permitted. This year, the national average of 192m² was reduced to 155m².

However, if you are on a tight budget, you can build the house yourself, without the assistance of an architect or a licenced builder.

Here are some points to consider before starting your DIY house construction project.

  • Get an Owner-Builder Exemption
  • Learn how to meet Building Code requirements
  • Apply for consents
  • Let your council know

Like getting a home loan for pre-existing homes, you can also apply for a construction loan if want to build a new home.

A Construction Home Loan is a different loan structure in which you, the borrower, draws down the loan or raise their borrowing in stages, as new construction progresses.

The builder will invoice you for the work performed as each stage of construction of your home is completed. The invoice is sent to your lender for payment. 

Is it cheaper to build or buy a house in NZ?

A house in New Zealand in itself is costly, regardless of whether it’s newly constructed or bought. There are multiple fees to be considered, including council fees, utilities, maintenance fees, and other expenses outside of purchasing a property. 

There is no exact answer, but it is important to consult with your bank about your finances to get a rough estimate of how much you can use for a home.

When building a house, you start with a blank canvas. You are in charge of your home's architecture and overall design. When it comes to buying a new home, you get what you pay for. You can choose to renovate some areas of the house, but this will cost a lot of money in the long run, especially if leaks and other defects have been uncovered.

In any case, it's probably wise to seek professional advice before signing anything. You can also conduct your own research to learn about the permits required, the best location, and the materials to use once you begin house hunting or construction.

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About the author
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Tina M.

Tina M. is a content writer and an aspiring law practitioner. She mainly writes about real estate, finance, and investing. Ever the creative, she loves painting, home renovating, and getting meme ideas from reality TV.

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