Kiwis who dream of buying a new home have many choices. They can buy off the plan before the build starts, a group build home or spec build, or have a home architecturally designed and built to meet their every need and desire.
Off the plan
Buying off the plan means signing up to buy a brand new home that is still at concept stage. All types of homes can be sold off the plan, although apartments are commonly sold this way.
The developer advertises the project with mocked-up plans and finds buyers, who pay a deposit of 10% usually. The buyer then waits for the home to be built. Typically developers need a number of pre-sales before the bank will lend on the project. In return, buyers get a discounted price for signing up early.
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Off the plan purchases can be great bargains, but they do come with additional risk. The build may never happen, for a range of reasons. If that happens the deposit will be refunded.
An interior of a home built by Classic Builders, one of the many group builders available to buyers. Photo / Classic Builders
Mortgage pre-approvals can lapse before the home is built and if that happens, there is no guarantee that buyers will still qualify for a new mortgage to settle the sale. Their employment may have changed, interest rates risen, borrowing rules and other regulations changed, or banks’ appetite to lend might lessen.
Developers can sometimes use “sunset clauses” to cancel builds if they’ve grown too expensive. A sunset clause is a clause in the contract which allows the sale to be cancelled if certain events happen, such as the CCC not being issued within a certain timeframe.
When the build is complete and the Code Compliance Certificate (CCC) issued, the buyer pays the remaining 90% and the sale is then settled.
Group build homes
The largest home builders in New Zealand are group builders such as Classic Builders. They can offer “house and land packages” which combine the convenience of selecting a pre-designed home matched to the section, custom designed homes with inhouse designers dedicated to bringing your unique vision to life, project management and construction. Depending on the type of home desired, buyers can personalise some or all of the elements in their new homes.
Even with a wide range of ready-to-build plans, it’s rare a group builder client doesn’t customise something, says Mark Hooper, building consultant at Classic Builders. “Personalisation options for group build homes include a wide range of elements that can be modified ranging from stud heights to colours. We also look at what the land gives us in terms of views, orientation, sun rising, etcetera, then we design a custom house for each client.”
Buying a house before construction is completed is known as buying off the plan. Photo / Getty Images
Off the plan builds are sold with a 10% deposit and 90% on completion. “We can do it that way for house and land packages because typically we’re dealing with first-home buyers or second-home buyers. It means they can still pay rent and afford to live,” says Hooper.
The other less common option is that the buyer gets a construction loan and makes progress payments during the build. They tend to pay less because the builder does not need to borrow the money to fund the project. “If someone wants to progress payments, then we make the package cheaper by up to $25,000 or $30,000 on a standard build cause we’ll take the holding costs off,” says Hooper.
Spec homes
Group home builders and small builders sometimes work on one home at a time and sell it before moving onto their next project. If they have the money, they buy land, build a home and then market it. Depending on when the buyer gets involved, they may have more or less opportunity to personalise elements of the build. The advantages to buyers include that they don’t need a construction loan, they can see the product before buying, and can move in.
>> Next steps: The OneRoof home building guide part 6 - timelines and finishing your build
* This article was created in partnership with Classic Builders
