Buy a house or build your own?

After months of tramping through show houses and finding nothing you like, your thoughts might turn to the idea of building your own house. That way, you can design it to your exact requirements, get the look and feel you want, and be totally in charge of the finished product.

It sounds ideal, and certainly there are advantages to building your own house. But there are several factors to consider first - and careful consideration might see you heading back to the Sunday afternoon show house slog instead.

The first and most obvious factor is location. Not every suburb has plots still available to build on. Established suburbs definitely don't. Your choice of suburb will be restricted to those newer suburbs that are still being developed. Do these suburbs meet your criteria in terms of proximity to schools, shops and your place of work?

Secondly, it can be harder to get a bond if you plan to build. Banks will only authorise a loan to be used for the construction of a house if the National Home Builders Registration Council (NHBRC) has approved the building contractor. It's an extra bit of red tape for you to wade through.

Thirdly, and most significantly, can you afford to build? The first cost to bear is that of living somewhere while you build. Then the actual building costs begin. Tiles, doors, lights, window frames, paint, kitchen and bathroom fittings and accessories vary widely in price.

According to Eugene Calitz of Builders Estimating and Allied Services, a company that specialises in building costs estimation, a house with bottom-of-the-range finishes could cost about R2800 per square metre, while a house with top-of-the-range finishes could cost about R7000 per square metre.

The price of cement, bricks and steel have increased quite dramatically in recent months due to supply and demand issues, says Eugene, and could continue to increase. Currently, a bag of cement costs an average of R55, bricks cost between R1,40 and R2 each, and steel costs about R8000 per ton.)

These costs per square metre exclude the services of a builder, a plumber, an electrician, an architect, an engineer, and a project manager. Oh, and the actual plot of land on which you're going to build, of course!

If you're thinking of building, do you know exactly what you want, or do you need someone to help you find out? Can you do any of the work yourself (in particular, the general contracting), or will you be paying someone to do it all? If there is anything you can do yourself that will help to cut costs? Another cost to factor in is establishing a garden.

As a rule of thumb, people who build find themselves spending up to 20% more than they had budgeted for, so be generous in your estimations so that you know what you're in for. Remember that the new National Credit Act will prevent you from overextending yourself on a building loan. You might run out of funding before your home is complete. Do you have extra finances available to finish the house?

Fourthly, you also need to have a high tolerance for stress, if you are planning to build. Seldom does a building project go perfectly. Progress can be delayed by bad weather and poor workmanship that needs to be redone, delivery of building materials might not always be on time, and contractors might not arrive as planned.

These are some of the practical aspects of building a house. But because the focus of Money Matters is on making the most of your money, we must emphasise that the decision to buy or build should ultimately be a financial one. Do your calculations very thoroughly. Compare the cost of the house you want to build to the cost of existing houses of similar size and finish on the market. In the property world it is generally held that building will cost about 6% more than buying, but that percentage will increase as the cost of building materials increases.

If it's cheaper to buy a house than to build, even if the house you buy does not meet your exact specifications, think about the money you are saving. Although it's tempting to want a dream house, keep your focus always on your finances and your financial goals.

A middle-of-the-road option is to buy a house and over time, as your finances allow, alter or renovate it to meet your living requirements. Pam Golding Property Group reports that the "build or buy" dilemma has brought about a substantial increase in home renovations countrywide. Current house prices, land values and building headaches have resulted in many people staying put and choosing instead to renovate, alter and modernise their existing homes. Well-executed renovations can increase home values more than their cost.

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