To Build or Buy? (The Bugle)

To build or buy, is the question often asked by many people looking for their ideal home? We are fortunate to have a range of vacant land options available along the Dolphin Coast at pricing, which is very competitive in some areas, to relatively high in other areas where the scarcity factor has started to excert upward pressure on the pricing. The price difference between exceptionally well located sites, very often defined by the outlook, shape and steepness of the property, and sites which can be considered less prime, has widened significantly over the past year and can be expected to continue as those buyers with the available funds chase an ever smaller selection of the best sites. 

Building costs vary significantly and depending on what is actually included in the pricing can be a point of debate. In general you get what you pay for. Homes in Zimbali are regularly being built at a cost of R15,000/sqm and represent the very top end of the market. Very few homes are being built at the higher end of the quality spectrum at less than R11,000/sqm. Of the 32 vacant land options available for sale within Zimbali Coastal Resort, the gross price range is currently from R895,000 to R8,000,000. There are a few sites listed for sale at higher pricing which are excluded for the purposes of this exercise. The site size range is from 1,001 sqm. to 2,283 sqm. The selling price per sqm. ranges from R577.04/sqm. to R3,996.00/sqm. The average rate/sqm. for vacant land in Zimbali across the current available stock is R2,213.29/sqm. Interestingly the highest selling price/sqm. in this pool of properties is not for a beachfront site, although we can expect the large prime beachfront properties to trade at pricing close to R4,000/sqm. for land only. A recent example registered in the deeds office was the sale of a 2,386 sqm beachfront site at R10,500,000, which represents R3,981.56/sqm. 

If, as a home builder and developer with the aim of selling your newly completed residence, you are starting at R4,000/sqm. for the vacant land, and building at a rate of R15,000/sqm., the existing stock of re-sale options will provide keen competition. These will typically trade at pricing 25% below the newly built options. This experience in Zimbali is re-enforced by the FNB published “Full Title Property Replacement Cost Gap” statistic which measures the difference between the replacement cost and the property value, expressed as a percentage of the property value. The 2012 third quarter figure measured 23.5%, which is a slight decline on the 24.1% of the previous quarter. It is therefore always generally going to be more expensive to build, but the advantages of designing something exactly according to your needs and being able to employ the latest building materials and finishes typically makes up some of the replacement cost gap.

(Author: Andreas Wassenaar, published in The Bugle, 21st Nov 2012)