Building a home: Understanding costs and how to begin in Australia

How much does it cost to build a house? Much like trying to get a straight answer out of a builder, it can vary. Building costs can differ significantly depending on a range of factors like location, permits, materials and labour.

Keen to build but don’t know where to start? Read on to learn more about how much it costs to build a home and the costs you may not be aware of.

Key costs to consider when building a home

There are a number of different expenses you’ll need to account for in your budget if you’re planning to build. Here’s a breakdown of the key costs:

• Labour and contractor fees: Building a home is a huge undertaking that requires expert skills, so you’ll need to secure properly licensed trades to complete the various work. Skilled trades like builders, electricians and plumbers charge anywhere from $50–$160 per hour, often comprising 10%–20% of construction costs. These costs vary depending on your city. A great way to check on how much you should budget for these trades, is to look online using a service like Hipages, who use their data to collate the cost of work in each city around Australia.

• Financing costs: Unless you have enough cash in the bank to cover the costs of a build, chances are you’ll need to take out a construction loan. Unlike traditional home loans, construction loans typically charge higher interest rates due to the risks that come with building. You’ll also need to account for other upfront costs, like your deposit, application fees and ongoing interest payments during the build. 

• Other surprise costs: Don’t forget to factor in the other costs that come with building a home, like insurance, landscaping and even temporary accommodation during the build.

• Materials and supplies: Basic supplies like bricks, timber and roofing range from $90,000–$150,000+, with costs influenced by home size, finishes and market fluctuations. Be wary when looking at some guides that have data older than 2023 and 2024, as the cost of building materials and supplies has increased significantly since the pandemic.

Different scenarios for building a home

There are several different approaches to building a home. With each approach comes its own set of considerations. Let’s take a look at some of the most common scenarios for building a home. 

Preparing an empty site 

If you already own land, building a home typically involves preparing the site, designing the house and obtaining necessary permits.

Site preparation, including grading, soil testing and clearing vegetation, can cost $5,000–$20,000, depending on the land's size and condition. You might also need to install utilities like electricity, water and gas, adding another $5,000–$15,000 to your budget.

Be sure to check local council rules to ensure your design complies with zoning laws or environmental overlays.

Demolishing and rebuilding 

Many people choose to demolish and rebuild in areas where land is valuable, but the existing home is outdated or unsuited to their current needs. 

Demolition costs range from $10,000–$50,000, depending on the house size and whether hazardous materials like asbestos are involved. It’s important to be aware of strict council regulations, including heritage or conservation overlays, and secure approvals before starting demolition.

Check your address using our online property pages to see if your home is heritage listed or has any other conditions that you need to know before you build.

Buying a plot to build 

Ideal for first-time builders or movers, this option involves purchasing land specifically for a new home. Many developers offer land and home packages, combining a block of land with a choice of home designs.

Land costs vary by location, with suburban plots generally cheaper than inner-city land. Make sure the land is build-ready, as soil tests, surveys and utility access can add $1,500–$5,000. For land and home packages, developers usually handle this for you, but make sure to get that in writing before you sign on the dotted line. Our mortgage brokers can help you through this process also, along with helping you on the rest of your home buying journey.

Alternative options if building a house is too expensive 

Regardless of your approach to building a home, there’s no denying that building is an expensive undertaking. That said, there are a number of alternative options if building from scratch is out of the budget.

Home extensions and renovations

Rather than building a new home, extending or just renovating your existing house can be a more affordable way to customise or refresh your space. The scope of your project will depend on your property, needs and budget.

For instance, you could raise your house to add a second level or extend outwards to create a new room, bathroom or living area. Alternatively, renovating key spaces like the kitchen or bathroom is an excellent way to facelift your home and boost its value.

Costs vary based on project size and complexity. Home extensions typically cost $1,200–$2,500 per square meter, while renovations range from $20,000 for minor updates to $100,000 or more for major transformations

You might be interested in: Tips for upgrading or renovating your home

Buying an off-the-plan home

Off-the-plan homes are purchased before construction begins, often in new housing developments. Compared to custom builds, off-the-plan homes are often more affordable as developers streamline costs by using standard designs.

Not only is this approach cheaper than a custom build, but it often requires a smaller upfront deposit of around 5%–10% of the purchase price.

Prefabricated or modular homes 

Prefabricated homes are built off-site and then assembled on your land. They’re typically quicker and more affordable than traditional builds. 

Prices range from $100,000 to $300,000 depending on size and features, but you’ll also need to own or buy a block of land to assemble your home on. You may also need to account for transport costs from the prefab factory to your site.

Average cost to build a house by state

There are so many different cost considerations that go into building, but these expenses often vary by state and territory too. The differences in costs are typically driven by labour rates, material expenses and the costs associated with permits and approvals across the different states, territories and even local governments.

Here’s a quick breakdown of the average cost of building across the states and territories.

Source: ABS: Characteristics of new residential dwellings - A 15 year summary

Steps to building a house

Starting the process of building a house can feel overwhelming, but breaking it into clear steps will help you navigate the journey effectively. Here’s where you’ll need to start:

• Determine your budget: Assess your finances and decide how much you can afford to spend on your new home. Be sure to include costs for land, construction, permits and additional expenses like landscaping or utility connections. You can work with an Aussie Broker to understand your options. 

• Choose a location: If you don’t already own land, you’ll need to find a plot and ensure it’s build-ready. 

• Decide on a building approach: Decide between a custom home, a project home or a prefabricated home. Depending on your approach, you might need to find an architect and/or building team to help design and plan your build.

• Arrange financing: Once you’ve finalised your construction plan and obtained building approval, you can work with your broker or lender to apply for financing. 

• Start construction and monitor the build: Work with your builder to prepare for construction. It’s important to stay involved during construction and communicate regularly with your team. Visit the site to check progress and ensure everything aligns with the contract and design.

• Final inspection and handover: Once construction wraps up, conduct a thorough inspection with your builder. Ensure any defects or unfinished work are resolved before handover. You’ll also need to obtain an occupancy certificate, which confirms the house is safe and ready to live in.

If you’re considering building, renovating or extending your current home, but you’re not sure of your options, why not book in for a chat with an Aussie Broker? They’ll take the time to understand your needs and work with you to find the best option.