Why It Makes Sense To Build Sooner Rather Than Later

Don't wait to build your dream home! When you understand the inflation and interest rate cycles, you’ll see the financial advantages of building now versus later.

Why you should start building your new home sooner rather than later.

If you’ve been thinking about building a new home but are putting it off, you might want to rethink your decision. We constantly see our customers realising that it simply doesn’t make sense to wait.

While you might think that now isn’t the right time because of high-interest rates, high cost of living and stories of possible job insecurity, there are just so many advantages to starting your build sooner rather than later. 

You should always consider the construction of a new home as a long-term investment that will only increase in value over time. History has shown us that house prices always go up, and essentially never go down. Definitely not on a permanent basis anyway.

Understanding inflation and interest rates.

Interest rates and inflation will never be static or ideal, so waiting for these to go down before you start to build simply doesn’t make good financial sense. You’ll find that both inflation and interest rates are always trying to cancel each other out.

In fact, when you look back through the last 30 to 50 years, interest rates are still comparably low right now. 

For example, around 1989 to 1990, interest rates hit a record high of 17%. At the same time, inflation was sitting at around 7.5%. This is considerably higher than both the current interest rates and the rate of inflation. But the average house prices back in 1989 were only around $170,000. So it’s all comparative really.

According to the stats provided by Statista, inflation is expected to drop to around 2.5% by 2028. So if we relate this to the relationship between inflation and interest rates, it’s highly likely that interest rates will also drop and probably much sooner.

How interest rates affect consumer spending and prices.

As previously mentioned, when interest rates are high, consumer spending usually drops. On the other hand, once interest rates drop again, consumer confidence returns and people start spending again.

Often, when this happens, it can lead to a shortage of supply. And this forces prices up again because demand is greater than supply. This is a prime example of basic economics. 

By default, increased spending and higher prices have a flow-on effect on inflation and it starts to rise again. As you can see by this, the cycle of inflation versus interest rates is constantly changing and will do so until the end of time.

That’s precisely why there’s no such thing as a bad time to buy when looking at interest rates vs inflation, because interest rates and inflation will never be ideal. Inflation is always occurring and so there will always be rises and subsequent drops in interest rates.

Why you shouldn’t wait to start building your new home.

The Commonwealth Bank forecasts that interest rates could fall to around 2.85% as early as June 2025. However, according to the stats found on Statista, inflation is still expected to be around 3.37% during that year.

So, if you plan to wait for interest rates to drop before starting your new build, you’ll find that the prices of the materials needed to build your home will have risen during that same period, more than offsetting any long-term savings you might have been hoping for from the decreased interest rates. 

The goal of the reserve bank is to keep inflation between 2 & 3%. Sure, they don’t want it higher than that, but not many people consider that they don’t want it lower than that either. Whatever happens, the longer you wait, the more you’re going to have to pay.

This means that your new house will cost you more to build and as prices for materials continue to rise, inflation will also rise. And, you now know what that’s going to mean – another round of possible interest rate hikes!

But there’s one thing that you can be pretty certain of. The value of your investment can really only go one way – and that is up.

Property values always appreciate in the long-term.

Consider the difference between what average house prices were in 1989 compared to what they are today. Granted, there are rare occasions where some prices in particular areas might drop temporarily for extraordinary pressures, but this is always isolated and certainly never lasts.

That’s why real estate has always been a solid investment and will continue to be one of the best ways to invest in your future. 

Essentially, when it comes to building a new home, there’s never a good time to wait. Now is always the right time to take action, whatever type of home you’re building.

While the current interest rates might bite a little right now, this will only be temporary and our customers who did decide to take the plunge were glad that they chose to build sooner rather than later.

So, don’t be blinded by a single focus on interest rates. Try to look at the bigger picture with the realisation that property is always going to increase in value way beyond the interest rate costs you might have to pay along the way.

This means that the sooner you start building, the sooner you’ll see an increase in your investment.

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