Warnings for new home builds

There are many benefits of buying a newly-built home, not least the Kiwisaver grant for first-home buyers (maximum $20,000) and lower loan to value ratio of 10 per cent deposit, rather than the usual 20 per cent.

While owning a new home as your first home is a dream for many Kiwis, there are many pitfalls. As The New Zealand Herald reported this week, there can be enormous troubles with “off the plan” contracts, and deposits can be an issue of concern.

From a building perspective, there are things first-time new home buyers should be wary of too.

The gradient of your section warrants close attention. A section advertised as “flat” may not truly be flat, and often it's difficult for the naked eye of the laymen to tell. In order to meet Kiwisaver requirements, you'll need to begin with an absolute flat section. In general, every metre of slope adds approximately $20,000 onto the build cost and it'll be nearly impossible to meet the required budget with any kind of gradient.

To get the Kiwisaver grants, that total price of a new property build needs to come under $550,000 ($650,000 in Auckland). From an industry perspective, that will not buy you “a lot of house”.

With both land and building costs skyrocketing, it's possible corners will have to be cut in materials and workmanship. If you go down the route of buying from a commercial bulk development company, aesthetically, most fixtures and fittings are usually cheap, off-the-shelf varieties from a hardware store chain, and will be a lot of chattels.

Structurally, you need to be very careful as bulk new homes may have a very short-shelf life: they could look great for the first two years, but may degrade from there on.

One of the key ways to reduce building costs of a new house is to use unskilled tradesmen who don't work under proper supervision. It's also likely that subcontractors' work won't be effectively supervised: an affordable house bought from bulk stock doesn't come with a project manager. Subcontractors usually come in and out to “to their bit” as contractually obliged, but, like a jigsaw puzzle that doesn't quite fit together, the end product as a whole might leave much to be desired.

It also pays to be aware that construction costs may increase during the building period, and some contracts, left unchecked, will enable the developer to go ahead with these costs without consulting you.

You are protected by warranties under The Building Act (and tradesmen can't override these in their contracts) but a key draw to a new property is knowing you'll move into a “hassle free” property. You can't neglect the emotional toll that fighting over workmanship quality in the years to come will cause you, so choose your developer very wisely.