Building a home from scratch: is it better than buying a used or new home?

Building a home from scratch: is it better than buying a used or new home?

Economic fluctuations affect all sectors and real estate is no exception. Both purchase prices and rents are higher and conditions are tougher when it comes to taking out a mortgage. For this reason, some people are wondering if now might be a good time to build a home from scratch.

Building your own home allows you to customize your home from start to finish, but it also has some drawbacks because the cost can be higher. José Manuel Fernández, deputy general manager of UCI, explains that there has been an increase in demand for financing for this type of project, especially in the wake of the pandemic. Although it takes longer to build a home from scratch than to buy new or second-hand, with a financing solution tailored to each proposal the benefits for the user are also significant.

In spite of this, experts comment that second-hand still represents more than 80% of sales in our country and “at UCI we are beginning to see a greater tendency to buy a home and then renovate it”. According to data from the latest edition of UCI’s Real Estate Barometer, 51.2% of Spanish real estate agents say that their clients will carry out renovations when buying a home or, at the most, within two years.

The target of people who opt for this type of construction is aimed at people with high financial capacity, you have to buy the plot, carry out all the construction, taking into account the increase in the price of raw materials, buy materials, the suppliers we need, and this makes it more complicated.

What are the main difficulties?
The first obstacle to overcome when building a house is to decide on the land where it will be built. And not all of them are suitable. You have to take into account whether the land has the basic services and facilities to make an infrastructure habitable and whether it is legal to build there, as well as the limitations and topographical characteristics of the land itself.

There is also the price of the land to be built on (which will vary greatly depending on the municipality), the construction materials, the architect’s fees and labor, as well as all the relevant taxes such as VAT, city council fees and the Construction, Installations and Works Tax.

However, he points out that in the financial market there are options to help with the payment of these operations. These are self-promotion mortgages to finance individuals who want to build their own homes, and which differ from normal mortgages in that the money is received in installments according to the progress of the work.
To all this we must add the rise in the prices of raw materials, attributing it not only to the war in Ukraine, but also to the transport problem.

At this moment, what is better to buy second hand/new construction or to build a house?
For UCI, it depends on the needs of each buyer, as there are currently very good opportunities in both markets. “Price and financing are two decisive variables when it comes to starting a housing project”.
Emiliano Bermúdez answers that the real estate market in Spain in buying and selling has two disjunctions: new or second hand. “There is not enough supply of new construction, although this depends on the needs of each user and the location. If it is an area where there is new construction and it is within the buyer’s price range, then users tend to opt for new construction, but it is generally scarce and delocalized.”

The donpiso expert comments that the price of new construction continues to be more expensive than second-hand, because it has been a scarce product for years and the general price increases in housing in recent years are due, in large part, to new construction.