Do you build the new upgraded family home or do you purchase that eye-catcher?

Comparing cots in today’s economic climate should be taken into careful consideration. According to FNB Insurance Valuators, it costs more now to build a property than to buy a comparable property.

According to John Loods, Consumer Sector Strategist for FNB, the gap between building and buying was 19.4% for the first quarter 2013. The gap is narrowing but this is a gradual as the growth in property currently.

This gap has been one of the setbacks in the building industry, causing inflated property prices. This also resulted in a slight decline in the purchase of newly built property as opposed to already built homes, despite of lesser or no transfer fees offered by developers.

If we look at the gap in 2007, then we can see that there was a demand for both new and already built homes.

What are the current building costs?

A useful tool to use is Santam's building risk calculator. According to their calculator, the cost per square meter equates as follows:

  • Middle class homes range between R6650.00 to R8132.00/ m2
  • Luxury homes range between R9500.00 to R11875.00 /m2.

These figures are just an indication as there are other market factors which influence building costs such as finishings and the suburb of the property.

According to the Bureau of Economic Research, Stellenbosch building cost is rising at 40% faster than the rise in property.

Competition should however also assist in pushing prices down to more realist figures in the future, or will the market catch up to this pricing trend? These inflated building costs are possibly riding on the backs of commercial property developments which have seen a major upsurge up to date. Another major contributing factor to this disparity is the high labour costs in South Africa.

Properties with different values are available on Myroof. Browse our website for properties available.

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