The Cost Conundrum
As we say all the time, “all projects go really well until the budget gets in the way”. The proverbial money pit of house building is not one you want to fall into, so now, more than ever before, we are spending time to estimate and re-estimate the cost to build a new home in the face of price increases.
Shortly into the New Year, I sent out an email to our clients pleading for patience owing to an over-worked, under-resourced and under-supplied industry. I bravely offered some good news that price rises seemed to be drying up. No sooner had I pressed the ‘Send’ button I was struck by the Commentators Curse and a letter from our materials supplier (printed on some quality, hefty stock) arrived to inform me that various timber products were going up 10%-15% from April.
Before clients engage us we usually invite them in for a workshop, where we run through a cost exercise to see if the project has legs. It goes something like this:
Non-construction costs. These are the fees incurred to get to the point where the house is ready to build. Such is the complexity of navigating planning and consent processes, you will have had to fork out on engineers, designers, council and a myriad of different consultants (a client once complained that whenever he heard the word ’consultant’ it seemed to come with a bill for $3,500). We usually see non-construction costs between 8%-12% of the total cost of the project.
Siteworks. This is the bucket of cost that most people underestimate or omit completely from their mental calculations. It is also the most variable and unknown chunk of the cost to build, which is why design/build companies don’t like to talk about them (it ruins their $cost per sqm rate too). Siteworks include the costs of infrastructure (water, wastewater services, water connection, power and internet), excavations, retaining walls, driveway, council vehicle crossing, foundations and pretty much anything to do with site establishment and preparation. Typically this ranges from $150k to $250k, though it is not uncommon to see this figure hit $450k if the site is steep or has expensive infrastructure or access requirements.
The House. Finally something to show for all that money spent! It’s difficult to know who to trust with these numbers and there is a large range of variation. All I can recommend is that you ask around – from an architect through to a house company, and ideally someone who has recently built a house and will be honest with you. And make sure GST is included…
Like all builders, we have had to revise numbers upwards, so the general back-of-envelope number we trot out is $5k-$6k per square metre. So if it is a 3 bedroom house with double garage at around 170sqm, that would be around $950k for the house component (inclusive GST).
The Externals. The final bucket of pain comprises the decks, terraces, paths, fences, landscaping and all the miscellaneous tidy ups. This is ‘on average’ around $50k-$150k, though a fully implemented landscape design plus pool can set you back $300k.
All this to say that as of writing, we are seeing a 3 bedroom house of a good Box specification and design, costing around $1.1m to $1.4m as a total project budget (inc. GST).
Having searched for years to find the silver bullet to reduce costs, including standardisation and pre-fabrication, the one thing we hang our hats on is size. Size matters when it comes to cost and is the simplest way to reduce it. Our ethos has always been a focus on design quality over size. We also work with our build team to make sure that what is being designed is also practical to build.
A final thought: a house is a ridiculously expensive thing to build, particularly if it is only around for 50 years versus a house that is around for 100yrs. The difference? One is probably built using better materials and has a higher design quality, meaning it is loved for longer, maintained and changed rather than being bowled (we just demolished a house built in 1992 – it is a travesty). Unfortunately we don’t tend to think of an investment in those terms, so quality is a hard sell for many. However, one thing is proven time and time again – you get what you pay for!
If you have a project in mind and want to understand the cost to build, feel free to reach out and we can run through this process with you to see what costs may look like for your particular project.
