Everyone seems to have their own unique set of criteria for determining the ideal time to embark on their house building project. The same applies to people’s views on the right time to buy or sell a house.
In this blog, we discuss various factors people consider when deciding to begin their house building project.
It is not intended to provide property or real estate advice. Instead, it is restricted to individual houses and house renovations – it does not consider medium density housing or commercial developments.
#1. The economy
For some people, the current state of the Australian economy is the key consideration.
If the economy is buoyant with good performance across all sectors, interest rates are favourable, unemployment is low and company profits are high, this indicates the best time to build. The reverse applies if economic conditions are poor, a building project is best deferred.
The flaw in this approach is that economic cycles between good and bad times can be quite short – from 3 to 12 months. A building project from design to approval then construction can span 2 to 3 years. The economy can fluctuate several times during this period.
Another factor is that when economic activity is low a homeowner might obtain more competitive prices from builders as they compete for the limited work available.
#2. The real estate market
Another theory is based on the real estate market. If property prices are rising or high, it is a good time to build.
This proposition should also be scrutinised.
The reasons for the current market conditions need to be understood. Often a surge in property prices is accompanied by a rise in the level of building activity. This makes it difficult to obtain quotes or building costs are higher due to an abundance of work for builders.
Traditionally, house and apartment values in Australia have remained strong with a steady increase in capital gain. A recent article in the Sydney Morning Herald stated the median house price in Sydney was $575,000 in 2009. Despite the reports in 2018 and 2019 of falling house prices, the current median house price in Sydney is $1.0M.
So, basing decisions on whether property prices are high or low at any particular moment requires reflection on the long-term trends.
Many thoughts about the best time to build are based on obtaining the best timing. This leads to the question: how long can you wait for these “ideal” conditions? What are the “ideal” conditions? How does anyone predict the future with a high degree of accuracy?
Our politicians and economists consistently fail miserably with this task.
If a house building project spans 2 to 3 years (design to completion) and the house is occupied for 10 to 30 years (25 year mortgage), how does anyone know the best time to build?
There are pros and cons to building in any economic period.
Some people think that if building is deferred, construction costs will fall, making their house more affordable. Building costs (labour and materials) follow the economy and property values. While costs may “flatten” or remain stable for a period, they rarely go backward.
In our current period of low inflation, building costs are rising by a similar percentage year on year i.e. 2% to 3% per annum.
In any case, most people cannot wait two years, five years or longer until the best time to build magically eventuates. As the saying goes, “life is what happens while people are busy making plans.”
Normally, more pressing needs outweigh economic factors: a growing family, the need to accommodate hobbies and other interests, essential building maintenance, or upgrading a property to increase capital value.
The truth: there is no “best time” to build a house!
Over the life of a house, the economy, the job market, property values, and interest rates will go through many cycles. The best time to build is usually when you are ready or when there is a real demand for a more satisfactory home.
This normally means you have acquired a site, secured finance, assessed your current and future needs, evaluated the various building options (self-build, project home or custom house) and have confidence the location selected is where you will be happy to live at least for the foreseeable future.
Contact Mark Lawler Architects to obtain further advice on building design, site suitability, the approval process and building construction costs.