Browse Forums Building A New House 1 Jul 24, 2009 12:18 am Hi We're a little nervous at the moment as we've had the final pricing come through from the builder and are wondering whether we're overcaptalising in the area we're building. We bought the land for $236K and at the moment with basic paving, aircon, all flooring, our contract with the builder has reached $300K. So our house will be $536K with additional landscaping done gradually over the years (will have to be patient!) Home loan will be $330K. In total when EVERYTHING is done in a few years our cost will be up around $550K. Do you think this is excessive considering the price of the land? (This may be an indicator of the area). Houses do sell for $550K+ in the area but only if they're really speccy. We consider ours will be speccy! Stone benchtops, 2.7m ceilings, nice tiling... classy, if I may say so (or hope it will be). If anyone is familiar with SA, we're building in the new estate in Littlehampton in the Adelaide Hills. Lovely spot but there are all spectrums of housing quality/price in the area. This will be our family home for at least 10 years so does it really matter what it costs? PS Has anyone set out to build a nice house then come unstuck with escalating landscaping costs that just can't be met? Like retaining walls, paving, garden beds, etc. Or is it just a matter of saving over the years to finish the backyard? How long did it take to finish the landscaping - hubby says we'll just have to put up with dirt for a long time! Re: Overcapitalising with our build - WDYT? 2Jul 24, 2009 2:02 am I don't think you;re overcapitalising. How many squares? Perhaps ask a real estate agent in the area for their opinion... Annie A thankful person is a happy person. [/color]My hobby design blog: http://aviewondesign.blogspot.com/ Re: Overcapitalising with our build - WDYT? 3Jul 24, 2009 5:52 am We are spending 270k + on our 89k block by the time its all done in a country Qld town its not ideal block but we refused to live anywhere but the area we are building and this block came up not may left in the area at this point. the house should be worth 400+ with luck but we plan to live in this area for at lest 14years of the kids schoolng time. we may be Overcapitalising a bit but feel if we plan to be there for 14 years we will build what we want. Re: Overcapitalising with our build - WDYT? 4Jul 24, 2009 9:48 am well my wife and i ARE over capitalizing i can even agree, but to get what we want we have to! we have no views, a paver plant across the road, and very nice houses go for around the 300k mark. we bought our house and land for 150k 4 yrs ago; now going to demolish and rebuild a mcmansion because of the location, size of block, big shed i can have, triple lane roadway, and cheap land we acquired. for anything remotely close to what we want we have to move to another area and spend another 200k more than our budget of 500k. currently there is a large redevelopment underway and when its finished it should more than make up for the loss. call us crazy but i am sick of moving house 2nd-Fix | Blog Building with Desyn Homes previously with the insolvent [url=https://www.facebook.com/7NewsAdelaide/videos/1162546323776021/]Endeavour Homes[/url] Re: Overcapitalising with our build - WDYT? 5Jul 24, 2009 9:54 am As I have said in other threads, the point about over capitalising is not what ratio of house cost to land is but whether your finished product will sell for the total that you paid for it - and you can only judge this by comparing sales of homes in your area similar to the one you intend to build. Whether over capitalising matters if you intend to stay in house a long time is another story Re: Overcapitalising with our build - WDYT? 6Jul 24, 2009 12:23 pm My opinion is that if you are calling the place home for a long time - there is nothing wrong in investing extra for those niceties. Re: Overcapitalising with our build - WDYT? 7Jul 24, 2009 1:08 pm Hi there, We feel we ARE over capitalizing also considering where and what we are building and what we are spending but we figure we are building a family home to stay in for many, many years to come and unless anything unforseen happens in the near future it will be fine. We arn't building this house to potentially make money from it in a few years time, so over capitalizing isn't so much of a concern for us. Each to their own! Building Thread viewtopic.php?f=31&t=13002 Site start: 8th July 2009 Handover: 11/12/2009! 5 months total build time. 40 sqs of luxuary...Bliss! Re: Overcapitalising with our build - WDYT? 8Jul 24, 2009 1:22 pm Ours is over capitalised... its probably the most expensive in the estate based on sale price (as in, I haven't seen one more expensive yet on realestate.com.au since we bought it 2 years ago) and we are putting even more into it. Could we sell it that price we bought it at - I don't think so. But as pinkfairymagic said, it's meant to be a long term family home, and will never be sold, so it doesn't really matter. Re: Overcapitalising with our build - WDYT? 10Jul 24, 2009 1:48 pm We think as we're staying long term it will be OK... Might as well get the house we want and not compromise. We're not building an extravagant house - just nice! Focus06 If you over capitalise doesn't the bank refuse to give you the funds? The finance side of things will be OK due to equity elsewhere. Re: Overcapitalising with our build - WDYT? 11Jul 24, 2009 2:05 pm Focus06 If you over capitalise doesn't the bank refuse to give you the funds? It would depend on what the bank valuation came in at as they will only lend up to a maximum of 90% (depending on who you go with) of the valuation amount. You'd then need to fund the difference from your own funds. Jo My Thread: https://forum.homeone.com.au/viewtopic.php?t=21736 Current Status: Frame stage complete 28.09.09 Re: Overcapitalising with our build - WDYT? 12Jul 24, 2009 4:27 pm According to a builder relative of mine, in days gone by the rule of thumb for over capitalising is your house should not be more than the value of your land, but in this current day and age of mcmansions the rule of thumb is anywhere up to 1.5 times the value of land for a house. However, all this is just numbers,numbers,numbers.... how do you place a value on a home you will be happy with? I reckon if you are not building purely as an investment and you are building something for you and your family, then you are building a home not just a house! In which case a few extra dollars is more than justified. Provided you don't go uber overboard and keep everything within reason I don't think you are over capitalizing. Two new-ish estates near our place in Melbourne were selling land between 250K to 350K in the last 5 years (standard blocks around 500sqm to 600sqm), absolutely nothing in those two estates sells for less than $750K these days (even with the GFC!!). So I reckon the 1.5 times rule is just about right. Best of luck with your home! Re: Overcapitalising with our build - WDYT? 13Jul 24, 2009 5:40 pm Our land is $212k house is looking to be about $235k all up. Trying to keep the house within about $30k of the land, seem to be going ok so far Re: Overcapitalising with our build - WDYT? 14Jul 24, 2009 6:29 pm Nervous, as has been said on other threads, any land: house ratio does not work in all areas, it may well work in the area of Melbourne that you describe, but the best indicator is still the finshed cost of house and land vs houses of that size/standard selling in the area. Re: Overcapitalising with our build - WDYT? 15Jul 24, 2009 6:32 pm Helyn Nervous, as has been said on other threads, any land: house ratio does not work in all areas, it may well work in the area of Melbourne that you describe, but the best indicator is still the finshed cost of house and land vs houses of that size/standard selling in the area. Agree 100%. I leave you to fend for yourself, figure things out yourself. Terrence Malick Re: Overcapitalising with our build - WDYT? 18Jul 24, 2009 6:45 pm Hi Roar, we too are building in Adelaide. Bought a decent size block in an older area (that is getting redeveloped near newer areas). The bank has said we overcaptilized and required us to get mortgage insurance, but we have sorted a deal out to avoid the insurance. The reason they said we overcaptilalized, is like you, there is nothing like what we want to build in the area. The next area over has a house the same (with not as many mod con's), but because it's not our area, that doest count. The closest recent sale in our area (ony 1 street over) is about $300k less. Huge difference! The bank just doesn't forsee what we do, with so many houses getting demolished and rebuilt. Our next door neighbours are getting built as we speak, we have an empty block across the road and down the road 23 units are getting demolished later this year for redevelopement. Bank valuers, just cant always see the bigger picture. Fair enough - they don't know you and should you not be fully prepared and not done your research it may be a concern, but as others have said - if you plan on it being a family home and you have done your research, I can see it being a problem. Blog:http://tamdaz-themajestic.blogspot.com The Majestic - Henley - Adelaide Thread:https://forum.homeone.com.au/viewtopic.php?f=31&t=20635 Day 200 23-4-10 Re: Overcapitalising with our build - WDYT? 19Jul 27, 2009 9:10 am yes,yes,.. it is a "rule of thumb"... and unlike the law of gravity of course it doesn't apply in all areas. Do your research, like others on this forum have knowledgeably mentioned... but I reckon you're just about right.. especially if it is a home for your family for some years to come (which in my opinion justifies a little extra cost). Best of luck!! Thank you so much everyone. This all makes a lot of sense. 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