Building vs Buying: What You Really Need to Know Before Making the Call
If you’re tossing up between building your next home or buying an existing one, you’re not alone. It’s a common fork in the road for many Aussies, especially first home buyers, trying to figure out what’s smarter, faster, cheaper, or just… better.
Now, if you're looking for a hard and fast answer, I’ll save you the scroll: there isn’t one. It’s not about which path is “right”, it’s about what’s right for you. But that said, here’s what you need to know to make an informed decision.
The Stamp Duty Advantage of Building
Let’s start with one of the biggest and most overlooked benefits of building: stamp duty.
If you’re a first home buyer in Victoria (or many other states), you’re likely eligible for a stamp duty exemption or concession. But here’s where building gets a major leg up—stamp duty is calculated on the land value only, not the combined land-and-home package price.
To give you some context:
Buy an existing home for $750,000? You’re likely paying stamp duty on that full amount.
Build a home where the land costs $450,000 and the build is $300,000? You’ll only pay stamp duty on the $450,000 (could be $0 with a stamp duty exemption).
That difference alone can save you thousands. Even if you're not a first home buyer, the savings can still be substantial—often close to half of what you’d pay on an existing property of the same total value.
You Might Also Be Eligible for the FHOG
If you're building a brand new home as a first home buyer, you could also be eligible for the First Home Owner Grant (FHOG).
In Victoria, this is currently $10,000 for eligible first home buyers building a new home valued up to $750,000. That’s a serious boost, and it can often help cover part of your deposit, your upfront costs, or give you a head start with furnishings once the build is done.
Building Comes With Less Competition
Here’s something many buyers underestimate, the emotional toll of buying an existing home.
Auctions are high-pressure.
Private sales can turn into bidding wars.
You can fall in love with a property only to be outbid by someone with deeper pockets or faster finance.
When building, you’re often dealing directly with land developers and builders, no auctions, no heartbreak, and far less emotional rollercoaster. This can make the process feel more in your control, especially in hot markets where existing properties are snapped up fast.
The Hidden Cost of Time (and Rent)
Of course, it’s not all sunshine and stamp duty savings.
If you’re currently renting (or still paying a mortgage on another place), the build process means you’re covering two living arrangements for a while. While the end result might be exactly what you want, you need to factor in:
Rent or existing mortgage payments during the build
Council rates (on the land)
Ongoing bills while you wait to move in
This is one of the main reasons people opt to buy existing, they can move in straight after settlement and avoid the financial stretch of paying double.
How Construction Loans Actually Work
Let’s demystify this quickly.
When you build, your loan works a little differently to a regular home loan. Here’s a snapshot:
You usually settle on the land first (and start paying interest on that)
The build loan is drawn down in stages, as construction progresses
While building, your repayments are typically interest-only
Once construction is complete, your loan converts to principal and interest
So no, you're not paying interest on a $600,000 loan from day one. But yes, your repayments will gradually increase as the build advances.
Living With Mum and Dad? This Could Be a Strategic Win
If you’re lucky enough to be living with family or boarding somewhere low-cost, building becomes a much more attractive option.
Why? Because you avoid the “double housing cost” scenario. You can:
Keep saving while you build
Potentially increase your deposit
Walk into your new home with less debt and less stress
In this situation, building can absolutely be a smarter financial move—if you’re up for the process.
Building: It’s a Project, Not Just a Purchase
Let’s be real. Building is a journey.
Unlike buying a pre-loved home, building means:
Finding land in a suitable location
Choosing a builder
Deciding on design, floorplans, fixtures, colours, materials…
Managing timelines, changes, and approvals
It can be incredibly rewarding, but it’s also time-consuming, admin-heavy, and requires a lot more decisions.
Go with a volume builder? You’ll likely get a streamlined process but less flexibility. Choose a private builder? You might get more control, but at a higher cost and more involvement.
Either way, you need to be prepared for the ongoing nature of it.
Equity from Day One? It Depends
One of the common reasons people choose to build is the idea of instant equity, that the finished product will be worth more than what it cost to build.
Sometimes this is true. If you buy well (on both land and build), and the market moves in your favour, you could end up with a tidy buffer.
But it’s not guaranteed. You can also overcapitalise, especially if you go all out on upgrades or build in a slower-growth area. That’s not necessarily a bad thing if it’s your dream home—but it’s worth keeping in mind.
What About the Lending Side?
From a borrowing point of view, things aren’t wildly different.
Most lenders assess construction loans similarly to standard home loans
Some lenders don’t offer construction loans at all
Others might have quirks around how they treat construction costs or staged payments
A broker (like me) can help navigate that, but it’s definitely worth knowing not all lenders are equal when it comes to building.
So… What’s the Best Option?
Honestly? There is no universal “best”.
Building can be a great way to:
Customise your home to your lifestyle
Maximise concessions and stamp duty savings
Take advantage of less competition in the market
Grow equity strategically (in some cases)
Buying can be a great way to:
Avoid the complexity and time investment of building
Move in straight away
Get into areas where land is no longer available
Most people who build are doing it for lifestyle reasons, not because it’s the absolute best financial move. And that’s okay. If the process of building excites you, and you’re in a position to manage the timeline and decisions, it can be an amazing experience. In some cases though, building the right property at the right time can be a great financial investment too.
Still Weighing It Up?
If you’re on the fence and not sure what direction makes sense for your situation, I’d love to chat. There’s no pitch or pressure, just a conversation to help you weigh up your options and make the right decision for you. You can reach out via the contact form, or book a meeting.
