Is It Cheaper to Build or Buy a House? (2024)

Deciding whether to build or buy a home is a big decision. With housing prices at all-time highs across Canada, more homebuyers are wondering if it’s cheaper to build than buy.

Key Takeaways

• Building a home can be more expensive upfront, but offers long-term savings on maintenance and utilities.
• Buying an existing home is usually quicker and has lower financing costs, but may require renovations.
• Location, customization, and timing impact the cost effectiveness of building versus buying.
• Building a home takes 6-12 months on average, while buying a home can close in 1-2 months.
• Both building and buying require compromise – on budget, location, layout, or condition.

The answer depends on your budget, timing, location, and desire for customization. Here’s a detailed comparison of the costs, timeline, pros, and cons when deciding whether to build or buy a house in Canada, even without a realtor.

Cost Comparison: Building vs Buying a House

The upfront cost to build a new home is generally higher than buying an existing property. However, long-term maintenance and operating costs may be lower with new construction.

Cost to Build a House in Canada

• $100-$275 per square foot
• $200,000-$500,000+ for a typical 2,000 sq ft home
• Land costs $100,000-$1M+ depending on location

The cost to build a home varies significantly across Canada. Building a 2,000 square foot house can range from around $200,000 in rural areas to over $500,000 in Toronto or Vancouver.

The price per square foot ranges from $100-275 across the country:

Material costs, labor, zoning regulations, property values, and demand impact build costs. Custom designs, finishes, and green features further increase budgets.

Cost to Buy an Existing House

• $300,000-$1M+ depending on location/size
• Add renovation costs to update older homes
• Higher demand can lead to bidding wars

Across Canada, the average home price is $713,500 as of February 2023. However, prices range from around $300,000 for a modest home in Manitoba or the Maritimes to over $1 million in Toronto and Vancouver.

Buying an older property often requires additional investments in renovations and repairs. In a seller’s market, competition can also drive up purchase prices.

Myth Busted – Contrary to popular belief, it’s not always cheaper to buy an existing house than build new in Canada today. With rising material costs and housing demand, new construction may be price competitive.

Timeline: How Long Does Building a House Take?

Another consideration is the timeframe. Building a home takes significantly longer than buying a resale property.

• Buy land: 1-6 months
• Design & approve plans: 2-4 months
• Obtain permits: 1-3 months
• Construction: 6-12 months

The entire process of building a custom home often takes 12-18 months or longer. Finding and closing on land can take several months. Designing plans and obtaining local permits add a few more months. Finally, construction typically takes 6-12 months depending on scale and weather.

In contrast, buying an existing house can take as little as 1-2 months from start to finish. This quicker timeline allows you to relocate faster.

Pros of Building a House

While building costs more upfront, it comes with several advantages:

Customization

Building new allows you to customize everything to your tastes – layout, finishes, features, etc. Your home reflects your lifestyle needs.

Brand New Condition

Everything is new – no outdated or worn systems, appliances, windows, roofing, etc. This reduces maintenance and increases energy efficiency.

Energy Efficient

Newer homes are built to modern building codes with better insulation, air sealing, and energy efficient systems. This saves on utilities.

Potential Appreciation

Brand new construction may appreciate faster with new demand. However, location has the biggest impact on home values.

Warranties

Many builders provide a warranty on defects and workmanship for the first few years. Appliances also come with warranties.

Pride of Creation

For many, building their dream home from the ground up is a satisfying experience and legacy. You oversee each decision.

Cons of Building a House

Building also comes with downsides:

Higher Upfront Cost

Land, materials, labor, and financing costs add up quickly. Building a 2,000 square foot home often starts around $200,000-$500,000+.

Long Timeline

With land purchase, designs, permitting, and 6-12 month construction time, building a home takes 12-18 months.

Construction Hassles

The construction process brings noise, dirt, material delivery trucks, port-a-potties, and other disruptions to your neighborhood.

Supply Chain Issues

Pandemic shortages and shipping delays make some building materials hard to source. Prices also keep rising.

Weather Delays

Snow, heavy rain, or extreme cold can delay foundation pouring and other exterior work, potentially extending timelines.

No Field Testing

Unlike an existing home, you don’t know if there are any issues with the roof, foundation, or systems until you live there.

Less Established Neighborhood

New subdivisions may lack landscaping, amenities, and neighborhood character that older areas have.

Pros of Buying an Existing House

On the other hand, purchasing an existing home has several perks:

Faster Move-In

Buying a resale home is much quicker, allowing you to relocate in as little as 1-2 months rather than waiting 12+ months.

Lower Upfront Cost

While variable by market, existing homes tend to be cheaper than building new. However, major renovations add costs.

Established Neighborhood

Existing homes allow you to choose from established neighborhoods with mature trees and landscaping.

Lock In Appreciation

Home values in desirable markets often rise quickly. Buying allows you to lock in gains. However, further appreciation is never guaranteed.

Field Tested

With an existing home, you can assess any issues prior to purchasing based on inspections and disclosures.

Potential Deal

In a buyer’s market or on homes in poor condition, buyers may negotiate significant discounts or value-adding renovations.

Cons of Buying an Existing House

Purchasing an existing home also has some potential drawbacks:

Compromises Required

Finding the perfect layout, location, lot, condition, and features is difficult. Some compromise is usually necessary.

Unknown History

You don’t know how past owners used and maintained the home. Only an inspection identifies some potential issues.

Higher Energy Costs

Older homes with outdated windows, appliances, insulation, and systems are less efficient, resulting in higher utilities.

More Maintenance

As homes age, roofs, siding, systems, and appliances need repairs and replacement, sometimes shortly after moving in.

Higher Interest Rates

Mortgage rates are rising, making financing more expensive. Building may allow you to lock in lower rates ahead of time.

Competition and Bidding Wars

In hot markets, existing homes often get multiple above-asking offers on the first day listed. This drives up prices.

Key Factors Impacting Build vs Buy Costs

Several factors influence whether building or buying a house is more cost effective:

• Location– Rural areas offer affordable build land, while downtown city lots carry huge premiums.
• Customization– Building new allows complete personalization while existing homes require compromise.
• Market Conditions– Seller’s markets drive up buying costs while material delays increase build budgets.
• Renovations Needed– Minor cosmetics or major overhauls substantially increase total buying costs.
• Energy Efficiency– New homes save thousands on utilities over older, outdated properties.
• Appreciation Potential– New constructions in high demand areas see quick gains but markets vary.
• Maintenance and Repairs– Brand new homes have lower upkeep costs than aging systems in old homes.

Which is Better: Build or Buy?

At the end of the day, whether building or buying a house is the better choice comes down to your budget, priorities, and timing.

Building makes sense if you:

• Are flexible on location
• Highly value customization
• Want energy efficiency and lower utilities
• Have time to wait 12+ months

Buying is better if you:

• Need to relocate quickly
• Are budget conscious
• Find a home/neighborhood you love
• Lack time for a lengthy build process

Both options require compromise. Assess your must-have features, ideal location, timing, and budget to determine if the pros of buying or building a home align best with your goals.

Frequently Asked Questions

Q: Is it cheaper to build a house or buy one?

A: The cost of building a house depends on various factors such as location, size, materials, and labor. In some cases, building a house from scratch can be more cost-effective than buying an already existing home. However, it is important to do a thorough cost analysis and consider factors such as land cost, construction costs, and additional expenses before making a decision.

Q: What is the average cost of building a house?

A: The average cost of building a house can vary greatly depending on the location and the size of the house. However, as of 2021, the average cost to build a house in the United States is around $300,000. It is important to note that this is just an average and the actual cost can be higher or lower based on various factors.

Q: How much does it cost to build a home compared to buying one?

A: The cost of building a home can be higher or lower compared to buying one depending on several factors. While building a home allows you to have more control over the design and can potentially be cheaper, it also involves additional costs such as land purchase, architectural fees, building permits, and more. On the other hand, buying an existing home may come with its own set of costs such as inspection fees, repair and renovation costs, and real estate agent fees. It is crucial to consider these factors and do a comprehensive cost analysis.

Q: What are the pros and cons of building a house?

A: Pros of building a house include the ability to customize and design the house according to your preferences, potentially lower construction costs, and the opportunity to use energy-efficient materials. However, the cons include the need for extensive planning, longer construction time, and the potential for unexpected expenses or delays. Additionally, building a house requires knowledge of the construction process or hiring professionals to oversee the project.

Q: What are the pros and cons of buying an existing home?

A: Pros of buying an existing home include the ability to move in immediately, established neighborhoods and amenities, and less involvement in the construction process. Additionally, existing homes often come with landscaping, appliances, and fixtures. However, cons include the potential need for repairs and renovations, limited customization options, and the possibility of hidden issues that may surface after the purchase.

Q: What other costs should I consider when building a house?

A: When building a house, it is important to consider additional costs such as land purchase price, architect and design fees, engineering fees, building permits, utility connections, landscaping, interior finishes, appliances, and furniture. It is advisable to have a comprehensive budget that includes all these expenses.

Q: Do I need to hire a real estate agent or a home builder when building a house?

A: Hiring a real estate agent is not necessary when building a house as they primarily deal with buying and selling existing homes. However, hiring a home builder or a general contractor is highly recommended as they have the expertise and experience to oversee the construction process, manage subcontractors, and ensure the project is completed within budget and on time.

Q: What is the difference between a construction loan and a mortgage?

A: A construction loan is a short-term loan that provides funds for the construction of a new house. It is typically used to cover the cost of materials and labor during the construction phase. On the other hand, a mortgage is a long-term loan that is used to finance the purchase of an already existing home. Once the construction is completed, the construction loan is usually refinanced into a mortgage.

Q: Are there any financial incentives for building a new home?

A: Depending on the location, there might be financial incentives for building a new home. These incentives could include tax credits, grants, or low-interest loans for energy-efficient homes. It is advisable to research local and state programs and consult with a financial advisor or a home builder to explore available incentives.

Q: What should I consider when deciding whether to build or buy a house?

A: When deciding whether to build or buy a house, consider factors such as your budget, time constraints, desired level of customization, location preferences, and long-term plans. Assess your priorities and goals to make an informed decision that aligns with your needs and financial situation.

Conclusion

When it comes to deciding whether to buy or build a house, the main factor that usually comes into play is the cost. Many people believe that building your own home will be much cheaper than buying an existing one, but this isn’t always the case.

The costs of home construction can quickly add up, from finding a lot to build on, to buying the land and building the actual house. There are also additional expenses to consider, such as the cost of renovations or any potential cost overruns during the building process.

On the other hand, buying a preexisting single-family home can come with its own benefits. It is often easier to buy a home rather than going through the entire process of building one from scratch.

Additionally, the upfront costs of buying a home may be lower than the total cost of building a new house. Ultimately, whether it’s cheaper to build or buy a house will depend on your personal circ*mstances and the specific location you’re looking at.

• Building costs more upfront but saves long-term on maintenance/utilities.
• Buying is quicker with lower financing costs but may require renovations.
• Customization, timing, location impact the cost effectiveness.
• Building takes 12+ months, buying can close in 1-2 months.
• Both require compromise on budget, layout, location, or condition.

Sources:

https://myhouseby.com/2019/07/31/the-advantages-and-benefits-of-new-home-construction/

https://www.angi.com/articles/how-long-does-it-take-build-house.htm