THE TRUE COST OF NEW CONSTRUCTION HOMES: WHAT BUYERS NEED TO KNOW
New construction homes are often marketed as modern, energy-efficient, and low-maintenance but many buyers are surprised to learn that the sticker price is rarely the final price. Understanding the full cost of buying a new construction home is critical for budgeting properly and avoiding financial stress later.
This guide breaks down the real costs of new construction homes, including hidden expenses, upgrades, and long-term considerations.
1. Base Price vs. Final Purchase Price
The advertised price of a new construction home is usually the base price. This is the starting point and does not include:
• Lot premiums
• Upgrades and design selections
• Landscaping, fencing, or decks
• Closing costs and taxes
Many buyers are surprised to see their final price increase significantly once these items are added.
2. Lot Premiums
Not all lots are priced the same. Builders often charge extra for:
• Larger lots
• Corner lots
• Walkout or view lots
• Lots backing onto green space or water
Lot premiums can range from a few thousand to tens of thousands of dollars depending on location and desirability.
3. Upgrades and Design Selections
This is where costs can climb quickly.
Common upgrades include:
• Flooring and tile
• Cabinets and countertops
• Lighting and electrical packages
• Appliance upgrades
• Plumbing fixtures
• Structural changes (extra rooms, larger garages, ceiling height)
Many buyers spend 5–20% of the base price (or more) on upgrades alone.
4. Landscaping, Fencing, and Window Coverings
In many new developments, the home does not come fully finished outside.
You may need to budget separately for:
• Landscaping and sod
• Fencing and gates
• Decks or patios
• Blinds or window coverings
These are often overlooked but can add thousands of dollars to your move-in costs.
5. Closing Costs and Legal Fees
New construction homes still come with closing costs, including:
• Legal fees and disbursements
• Title insurance
• Property transfer tax (where applicable)
• Adjustments and utility hookups
These can add up quickly and should be planned for early.
6. Taxes and GST (Canada)
In Canada, many new construction homes are subject to GST. While rebates may be available, not all buyers qualify for the full amount.
It’s important to confirm:
• Whether GST is included in the price
• If you qualify for any rebates
• How GST affects your final purchase price
Always review this with your lawyer or accountant.
7. Financing and Mortgage Considerations
New construction mortgages can differ from resale purchases, especially if:
• You’re buying pre-sale
• Construction will take months or years
• Appraisals change before completion
There may also be:
• Rate hold expiry risks
• Additional deposit requirements
• Differences in draw schedules for custom builds
This can affect your overall cost and financial planning.
8. Moving, Storage, and Interim Housing
If construction is delayed, you may need to budget for:
• Temporary housing
• Storage fees
• Multiple moves
These costs can add up, especially if timelines shift.
9. Long-Term Costs and Considerations
While new construction homes often have lower maintenance costs early on, it’s still important to plan for:
• Warranty limitations
• Future repairs after warranties expire
• Property tax increases in new developments
Lower utility bills and energy efficiency can help offset some long-term expenses.
Realistic Example
A home advertised at $800,000 might end up closer to $880,000–$930,000 once you factor in:
• Lot premium
• Upgrades
• Landscaping
• Closing costs
• Taxes and fees
This is why understanding the full cost upfront is so important.
New construction homes offer many benefits, but they are rarely as simple or as inexpensive as they first appear. The key to a smooth experience is planning, transparency, and professional guidance.
Knowing the true cost of new construction helps you:
• Set a realistic budget
• Avoid financial surprises
• Make confident, informed decisions