In Australia today, how much can you expect to spend when building a house?

If you’re dreaming of building a new home, you may be wondering how recent events have impacted house construction prices including builder’s costs and stamp duty fees

Without sounding trite, the answer to this could be summed up with that frustrating yet often accurate phrase: how long is a piece of string?

There are a number of different factors that can impact the cost of building a house, including but not limited to:

the size of the dwelling
the location and availability of resources the slope of the land
the quality of the fixtures and fittings

With this in mind, there are some “ballpark figures” I can come up with, to give you a guide as to how much it may cost you to build a property.

But before I do, let’s look at…

What the recent government stimulus has done to building costs

HomeBuilder and other state-based programs have provided extensive support to the housing sector, particularly for detached housing as opposed to apartments.

With new contracts now no longer eligible for the HomeBuilder scheme, it is conceivable that the level of dwelling approvals will soften (possibly sharply) from here.

However, since June 2020, 114,000 private detached houses have been approved, the highest number of approvals over a 10 month period since 1989.

These record house building approvals driven by the government’s HomeBuilder program have sparked shortages of key tradespeople and helped push the price of materials up by as much as 50 per cent.

As the Australian Bureau of Statistics reported the number of approvals to construct new houses jumped 20 per cent to a record 13,939 in February, the Master Builders Association said building sites faced delays of up to three weeks to get tradies.

Rampant demand in the renovation and home building sector is hitting customers with significant delays and pushing up the price of materials.

And disruptions to international supply chains are only making matters worse.

 

Although HomeBuilder has now been phased out at the end of March 2021, it’s highly likely we will see a continuation in this trend towards higher residential construction costs as it will take some time for builders to work through the surging pipeline of house approvals.

Housing construction cost rose 1% over the December 2020 quarter.

CoreLogic’s national Cordell Housing Index Price rose by 1.0 per cent over the three months to December 2020, after the previous quarter increased by a lower 0.6 per cent.

The Cordell Housing Index Price (CHIP) measures the rate of change of construction costs within the residential market and covers freestanding and semi-detached single and two storey dwellings.

The final index for 2020 showed residential construction costs were 3.6 per cent higher annually.

Meanwhile, figures show the consumer price index (CPI) increased by 1.6 per cent over the September 2020 quarter, compared to a fall of -1.9 per cent over the previous quarter which was largely driven by free child care and price falls in automotive fuels.

The following table shows how the Cordell House Price Index (CHIP) which message the rate of change of construction costs in residential market has changed

Key findings – Q4 CHIP Report

Residential construction costs continued to rise over the December quarter with a 1.0% increase in the national CHIP. The latest quarterly increase was the highest over 2020.
The New South Wales CHIP index increased by 0.7% over the December 2020 quarter, or 3.1 per cent year-on-year; lower than the national growth rate of 3.6 per cent.
Victoria saw the second highest growth in the CHIP index, at 1 per cent in the December 2020 quarter. This was in-line with the national growth rate, after increasing by just 0.6 per cent over the previous quarter.
Queensland had the highest monthly and annual growth of all the states through 2020. Its CHIP index rose sharply over the December 2020 quarter at 1.8 per cent, up from 0.6 per cent in the previous quarter.
South Australia’s CHIP index increased by 0.7 per cent over the 3 months to December. Annual growth was the lowest of all states, increasing by 3 per cent year-on-year.
The CHIP index for Western Australia rose by 0.7 per cent over the December quarter.

So: How much can you expect to pay?

First up, let’s get one thing clear: the base price that builders advertise on billboards and display on their websites are generally only a starting point, and do not reflect how much your home will actually cost when it’s 100% completed.

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This is because these “starting from” prices usually only include the basics.

If you are looking for a complete price that includes everything from the carpeting through to the landscaping and driveways as well as the white picket fence at the front, then you need to shop around for what’s known as a “turn-key” package – which means all you need to do at the end is turn the key and step inside.

The cost of building a house varies widely, particularly depending on where in Australia you are planning to build.

And as mentioned, the size of the property and the quality of the finishes will impact the final price, too.

According to ABS December 2019 Buildings Approvals data the Australian average was $1393.55 per sqm. However, this figure doesn’t include design, planning permits, any site works or any cost blow-outs.

With the average dwelling in Australia being 229.8sqm, this puts the cost for the build portion alone at $320,238.

Look at the guideline below, according to BuildSearch.

Average costs to build a new project home

City
Basic Finish $ P/Sqm
Medium Finish $ P/Sqm
Luxury Custom $ P/Sqm

Adelaide
$900
$1030
$2750

Brisbane
$1210
$1390
$3000

Melbourne
$1180
$1330
$2900

Perth
$950
$1010
$2600

Sydney
$1190
$1290
$3100

 

Obviously one can’t really compare the cost of an architectural designed home to one built by volume builder for his little $1600 per square metre.

For a very high-end home with custom-designed finishes and tailored design, you can expect to pay much more – anything from $3,000 to $5,000 per square metre and up.

Calculating the average price to build a house in Australia

It’s all well and good to get a ‘per square metre’ indication of price – but how do you translate that into actual costs, to give you an understanding of how much you’re going to pay to construct your new home or investment property?

There’s no point in going to the bank and saying, “I need to borrow $1190 per square metre”; they’re going to need a little more info to go on than that!

To help you understand the full costs of building a house, we’ve run the numbers on a standard home build of around 150-170m2.

Based on this sizing, if you wish to build a three- or four-bedroom home with one or two bathrooms, prices typically start as follows:

A budget-style, basic home:

From $160,000 for a 3-bedroom home and from $190,000 for a 4-bedroom home. For a turnkey package, add approximately $18-20,000.

A standard home:

From $180,000 for a 3-bedroom home and from $200,000 for a 4-bedroom home. For a turnkey package, add approximately $20-22,000.

A premium, higher end home:

From $200,000 for a 3-bedroom home and from $220,000 for a 4-bedroom home. For a turnkey package, add approximately $22-25,000.

Adding an additional story can add around $80-100,000 to the cost of construction.

Learning the lingo:

When you go through the process of building a home, you’ll come across plenty of industry jargon that can be tricky to understand – and even trickier to price.

Here are a couple of terms that may be included in your building contract, which are important to understand:

Provisional Sums

A provisional sum is an estimated amount of money that is determined by the builder, according to how much they believe the relevant job or material will cost.

Often the builder can’t put a fixed cost on certain parts of the job at the time of providing a quote or signing the building contract because of unknowns.

For example, while your site may look flat and the builder quotes as such, when staring the works, they may discover large clumps of rock that need to be removed and levelled prior to the slab being laid.

Or when the builder starts digging your foundations they realise they have to dig down further to hit firm footings, which will eventually require more concrete to be poured.

At times like this you’ll need to pay an additional sum on top of the initial contract price, as the allowance that had been provided has been exceeded.

Note: It is always a good idea to budget for around 10% of the total build price to allow for fluctuations in provisional sum prices.

Prime Costs

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A prime cost is an item that is subject to change during the construction of your home.

These include things like fixtures and fittings such as tiles, doors and taps, as these items may change depending on your final choice.

You’ll find an estimated amount is provided when signing the building contract, and then depending on your specification of the finishes during the build, these prime costs items may cost more or less if you elect to change them along the way.

Note: these items generally only change due to your change in preferences, so this could be an opportunity to trim costs if you opt for basic or standard fixtures, fittings and finishes.

What other costs can you expect to pay when building a house?

As mentioned earlier, there are a number of costs that come into play when building a house.

For a standard brick home without any custom finishes, you may be able to come up with a fairly clear budget.

However, once you start factoring in extras such as landscaping, driveways, retaining walls, fences and upgrades finishes and fittings, your costs can increase significantly.

These are some of the additional expenses to look out for may include:

Site Costs

These are the expenses that are incurred to prepare your block of land before construction can even commence.

These are usually completed by your builder and in most cases, the site costs are charged on top of the build price.

Site costs for an average block of land can hover around the $15,000 to $25,000 mark, however again, the location, size and slope of the block of land can have a substantial impact on the final charges.

Some of the typical expenses involved in a site cost can be:

Connections to services such as water, sewer, electricity and gas
Fences
Retaining walls
Site clearance (trees, roots, bushes)
Site survey
Soil tests

Other factors that can impact price

Once you have signed a contract with a builder and decided up the layout and design of your property, they will make plans and prepare documents, before arranging a ‘pre start meeting’.

The pre-start meeting is at the stage at which your house plans are finalised.

They are approved by council and you are ready to make your final choices in regards to all of the design aspects, such as wall colours, the types of light fittings and the materials used on the roof and on floors.

The ‘prime costs’ are generally already in place by the builder, however keep in mind that in base contract packages, the prices factored in often account for the cheapest materials, the most basic fittings and the most standard fixtures.

If you wish to change any of these, you could incur an extra cost.

Some of the parts of the home that you may wish to ‘upgrade’ during this process include:

Roof: depending on the materials you choose for your roof, such as tiles or colorbond, this can vary widely
Tiling: an allowance for a tiling amount per sqm will be made, but this can change depending on the quality and size of your final choice.
Fixtures and fittings: fancy, nonstandard taps and European appliances will obviously cost more than standard Australian-made fixtures and fittings. Additionally, labour costs may increase if you select items that are more complicated to install. Inclusions such as fully ducted air conditioning can cost up to $10,000 (more for two-storey home).
Kitchen: If you’ve ever shopped for a kitchen benchtop, you know how widely costs of a kitchen upgrade can vary. Again, the final price will depend on the quality of the item you choose and what is in your initial specification in the contract.
Electrical: If you decide to change your lighting layout from what has been initially drawn, this can add costs. For example, if the specifications in your contract allow for one standard light per room but you wish to have multiple downlights, this extra cost can add up.

Extra costs you should allow for

Some extra costs you need to take into account and which could end up costing you a significant amount of money include:

Soil Quality –One of the first things your engineers will organise is a soil test. They do this by drilling some bore holes and the best classification you can get is M classification soil. If your soil is more difficult to work with eg. Clay, Sand or Rock then you’re likely to have to pay extra.
Slope of the block– The easiest site to build on is a flat block. If your block slopes you’re likely to have to pay extra for more foundations, or to cut and fill the site (make it flat) and possibly for retaining walls.
Flood prone areas – some sites require the house to be raised with the floor level above natural ground level to cope with excessive rain or floods and this can add to the construction cost.

Contract variations

The final thing can impact your build price is variations, which are changes to the contract which are made after you have signed it.

The good news is, there is often an opportunity to change your mind as the build progresses if you really want to; perhaps you’ve been thinking about that glass splashback in the kitchen and decided it’s really not a good idea.

The bad news is, it will cost you!

Variation costs are costs you want to avoid where possible, as builders usually have a mark-up of about 20%-25% on variations.

On top of this, builders usually charge a variation fee of $250 each. These fees should be set out in your contract.

Government schemes that may help
1. First Home Buyers Grant

The First Home Owner Grant (FHOG) scheme was introduced on 1 July 2000 to offset the effect of the GST on home ownership.

It is a national scheme funded by the states and territories and administered under their own legislation, so it’s a bit different in each state

Under the scheme, a one-off grant is payable to first home owners that satisfy all the eligibility criteria.

If you’re wondering if you’re eligible for a FHOG you can check online here.

If you’re entering the market for the first time,

2. Stamp duty fees discounts

Stamp duty is a tax imposed by state government on the purchase or transfer of real estate.

The good news is often first home buyers are eligible for stamp duty discounts and, in some cases, exemptions depending in the state where they plan to buy.

To get an idea of the stamp duty exemptions and concessions available you can use this stamp duty estimate calculator online,

3. HomeBuilder grant

The successful HomeBuilder initiative was designed to support the residential construction sector by encouraging Aussies to build new homes rather than delaying their plans because of CoVid.

Applications for HomeBuilder closed at midnight on 14 April 2021.

In conclusion…

The average cost of building a house varies due to a range of factors, including size, location and quality of fixtures and fittings.

While I’ve tried to give you estimates the final price will depend on whether you chose a display home which the builder has designed with cost efficiency in mind, or a unique home- your own special castle which has never been built before.

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Read more: propertyupdate.com.au