Renovation costs in Australia are expected to drop between five percent and 15 percent in the next six months, according to industry experts.
Archicentre, the building advisory service of the Australian Institute of Architects, said residential building construction costs have not changed appreciably in the last quarter.
However, Angus Kell, ACT and NSW state manager of Archicentre, said a substantial slowdown in the planning of new commercial projects around Australia will see many tradespeople moving from commercial to residential projects over the next six months.
“This will result in more competition in the new home and renovation markets and we could see a drop in the costs of custom designed homes and renovations in some states,” Kell explains. “Coupled with rapidly reducing interest rates, we are seeing the best climate for residential construction for many years.”
Archicentre is Australia’s largest initiator of home renovations and collects data on renovation trends as well as costs.
According to the organisation, for new house and major renovations, the cost structure is approximately: materials 46 percent; labour 33 percent; fees, levies, permits and GST 21 percent; with a 5 percent to 15 percent increase in labour in country areas.
Kell said while construction costs will come down, the savings could be soon wasted by poor planning and failing to obtain competitive prices.
“Some home owners are paying between to 60 percent to 80 percent more for their renovations because they have poorly planned and managed renovations. Australians on average spend $7 billion a year on major renovations,” he says.
“Once you add the cost of interest onto the amount over the normal period of a home loan, the amount lost can run into tens of thousands of dollars on the average renovation of around $100,000.”
One of the biggest mistakes renovators make is getting a quote only on the structural part of the renovation, failing to recognise that around 50 percent of the cost is to be found in fittings and finishings.
“Whilst tendering provides a good guide to the cost of the project, choosing the cheapest quote was not necessarily the right decision. It is also vital that the builders’ credentials are checked out to ensure they are registered, has appropriate insurance, are able to show examples of their work and, importantly, are able to complete the project on time,” Kell adds.
“Tendering is not rocket science, it is carefully documenting and specifying the entire project so everything can be costed accurately and planned.
“For the builder, the provision of tender documents including the type of contract to be used and the specification of fittings and finishes provides an opportunity to provide an accurate costing. A contract also includes dispute resolution processes and is a major step in limiting the legal disputes which can arise if there is not accurate paperwork.”
According to Kell, the current climate has led many homebuyers to seek independent quality assurance checks to ensure their new home or renovation is being constructed to the contracted standards, and also to handle any disputes.