How to Estimate the Cost of Building a New House

When buying an established home in Australia there are only a few calculations that are needed such as adding stamp duty to the purchase price and some small fees associated with conveyancing and settlement. However, building a new home is very different as each builder uses methods to disguise additional costs. This guide will assist you in estimating the costs of building a new house.

Firstly, you need to get the base house price from the builder. No matter if you’re using a Building Broker, Architect or Project Home Builder you should receive a written quote that nominates the base price of the new home. This base price should include the minimum requirements to complete the primary house structure. This would be the costs for the foundations such as a slab on ground, through to the finals which would be brick paving, cabinets, ceramic tiling and electrical fit out.

Using the base price it is easy to calculate a square metre rate for building by taking the base price and dividing it by the overall size of the home. For instance, if the base price is $300,000 and the house size is 300 square metres then the square metre rate is $1,000 per square metre. This method of comparison is poor however, as ‘vertical prices’ aren’t easily compared. Vertical prices are costs that increase the overall rate, without adding space to the home. An example may be a luxury kitchen fit out which may cost an additional $20,000, but doesn’t increase the house size. Using our example above the square metre rate would jump to $1,066 per square metre and to the untrained eye would seem to represent poorer value than the $1,000 p/sqm house. Having an expert like a Building Broker working for you to help you compare ‘apples to apples’ makes the comparison process a lot easier.

However, the base price of the house normally excludes site costs and finishing costs. Often additional engineering costs are separate from this figure also. This is where it’s a lot more difficult to ascertain pricing until final quotes are received. However, as a guide site costs are generally less than $3,000 in Perth, Western Australia for sandy building sites. Where that is the case then engineering is also minimal. Additional surprises may arise if other site conditions are found such as rock removal or clay. Ask your builder or local council if those conditions are prevalent in your area.

Your finishing schedule should be completed also and will include items such as; Floor coverings to the main living areas, carpets to bedrooms and theatres, additional brick paving, window treatments such as blinds and curtains, air conditioning, clothes line, letter box, garden shed, swimming pool, swimming pool fencing and gates, light fittings and installation*, internal wall painting*, landscaping and reticulation* and boundary fencing*. The items marked with an asterisk * are sometimes included in the base price of the home or by the developer.

Finally, one cost that is most often overlooked when building a new house is the loan repayments while building. If you have borrowed money to purchase your block and building then you will start making repayments once the block settles. As you begin building the builder will draw down progress payments after each stage is completed on site. You should factor these repayments into your plan to build so that you can endure the repayment costs especially when the home is almost at completion and the repayments are the highest (as most of the loan will have been drawn down).

If you are using the services of a building broker then they should outline a clear guide as to expenses that may arise during the construction of your new home. Having a small contingency put aside for under construction variations should also be a consideration. If done properly, you should have peace of mind through the whole building experience and absolutely enjoy the process.

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