Cheaper to buy than build
PRICE CHECK: It is 34.4% cheaper to buy an existing house than to have a new one built
ABSA's recently released Third Quarter Housing Review didn't exactly stoke the flames of South Africa's residential construction industry but bolstered the argument for existing and auction homes.
According to the report, it was R528,100 or 34.4% cheaper to buy an existing house than to have a new one built in the second quarter of 2012.
This is due to the fact that the cost of having a new house built increased by 4.3% year on year in the second quarter of 2012, after rising by 4.8 percent year on year in the first quarter of the year.
The report stated that the average price of a new house stood at about R1,534,600 in the second quarter of the year. In real terms, the price of a new house dropped by 1.1 percent in this quarter.
But the average nominal price of an existing house simultaneously dropped by 3.2% year on year to approximately R1,006,500 in the second quarter, translating into a real decline of 8.5% and the R528,100 difference between new and existing properties.
Roy Lazarus, CEO of Park Village Auction says the significant price gap between new and existing homes, coupled with tough on-going financial conditions is forcing would-be home builders to re-think their options.
Having weighed up the cost differences, he says many opt to purchase existing homes or go the auction route instead as such properties currently represent far better value for money.
Lazarus explains that the fact that construction costs often exceed their original budget and time frame is also putting home owners off as these are risks many are not willing to take at this time.
Says Lazarus: "The upshot is that people are increasingly turning to auction properties as a viable alternative to the traditional property market and new builds."
For further information, contact Park Village Auctions on (011) 789-4375 or go to www.parkvillageauctions.co.za