If you’re planning to build your dream home, it’s important to know how much it’s really going to cost you, and why. By doing this, you can save yourself from unwelcome surprises along the way.
The rising cost of building
According to figures from BIS Shrapnel based on Australian Bureau of Statistics housing approvals data, the average cost per square metre for a new home rose only 4.6 per cent in the two years from the March quarter 2008 to the March quarter 2010.
This was almost half the 9.6 per cent price jump in the single year to the March 2007 quarter as demand for both labour and materials were riding the pre-GFC boom.
The global financial crisis put a brake on the rising cost of building a new home, although there are signs that both material and labour costs may pick up in the second half of this year.
Harley Dale, chief economist at the Housing Industry Association says that some of the slowdown in price growth has reflected the more recent economic climate which saw a number of large volume home builders offering discounts such at $30,000 of free landscaping, to keep work on their books and augment the First Home Owners boost.
Breaking it down
Building advisory service Archicentre estimates that the cost structure of a new house and major renovations comprises approximately 46 per cent materials, 33 per cent labour and 21 per cent for fees, levies, taxes and permits.
In terms of materials (with Sydney as a base), you can expect to pay 7 per cent more in Perth, 5 per cent more in Brisbane, 2.5 per cent more in Hobart, 0.5 per cent more in Melbourne and the same amount in Adelaide.
Labour costs also vary from state to state.
Archicentre notes that if you are building in regional or country areas then you will have to factor in the costs of transporting the material and sourcing the labour.
Cost of a new home
Angus Kell, state manager NSW and ACT at Archicentre, says while many builders advertise that you can build for less than $1000 a square metre, you would most likely just get a bare bones building for that price. The reality will more than likely be much higher than this.
“Some of these prices are based on a basic model with basic finishes, reduced palette, Laminex benches in the kitchen and maybe just one power point and one light fitting in each room,” says Kell.
Building on a non-standard block can also affect the cost of building.
“Generally project homes companies only quote for what goes on top of the concrete slab so if you have a steep site the costs will escalate,” Kell adds.
Project homes vs Architect Designed
Generally project homes are cheaper to build than architecturally designed homes simply because of economies of scale.
Angie Zigomanis senior analyst at BIS Shrapnel says that project homes are a production line process so they can be done to a price. “You can enjoy the benefits of prefabrication with a new home while a renovation has to be built around an existing structure.”
Kell says an architect designed home is likely to be over $2000 per square metre.
Of course if you are considering a knockdown and rebuild you must also factor in the cost of demolition into the equation and according to AV Jennings this can range from $10,000 to $30,000 or more in some circumstances.
In the end, building costs come down to supply and demand. The greater the demand for tradesmen, the higher the cost. Similarly the higher the demand for building materials such as steel, the more you will pay.
But as Kell says builders can be inventive and if the price of a material jumps astronomically then they will change their practices accordingly.