This is part 2 following my previous collection.
Here's an idea of what has happened to construction costs around Australia. Charter Keck Cramer has provided the following graphics to show the change in what it costs to build a house around Australia.
COST TO BUILD A HOUSE IN VICTORIA
Victoria’s CCCI recorded a 1.9% increase in construction costs over the December quarter, the lowest quarterly increase since December 2021 (1.2%).
The previous quarter (September 2022) saw residential construction costs increase by 5.6%.
Annually, Victoria recorded the largest growth rate of all states, with residential construction costs increasing by 13.0% over the 12 months to December 2022, overtaking the 12 months to September 2022 (12.3%) as the fastest pace of growth in construction costs since the 12 months to September 2000 (13.4%).
Victoria’s annual growth rate is currently higher than the national rate of 11.9%.
Over the 12 months to December 2021, construction costs across Victoria rose by 7.1%.
COST TO BUILD A HOUSE IN NEW SOUTH WALES
New South Wales recorded a further 1.8% rise in construction costs over the three months to December 2022, the lowest quarterly increase since the December 2021 quarter (1.0%).
The previous quarter (September 2022) saw residential construction costs rise by 4.0%, the largest quarterly increase on record excluding the September 2000 quarter which was impacted by the introduction of GST in July 2000.
Annually, New South Wales had seen the CCCI increase by 11.1% over the 12 months to December 2022, compared to 7.0% to December 2021, overtaking the 12 months to September 2022 (10.3%) as the fastest pace of annual growth the state had seen since December 2000 when construction costs increased by 12.3%, although again this was largely impacted by the introduction of GST.
COST TO BUILD A HOUSE IN QUEENSLAND
Queensland saw construction costs rise by 2.0% over the December 2022 quarter, down significantly from the previous quarter (5.8%), but slightly higher than the national quarterly growth rate (1.9%).
Queensland’s CCCI increased by 12.7% over the 12 months to December 2022, overtaking the 12 months to September 2022 (11.7%) as the highest annual increase the state has recorded since December 2000 (14.8%), and higher than the annual national growth rate (11.9%).
In comparison, Queensland saw the CCCI increase by a lower 7.3% over the 12 months to December 2021.
Cost to build a house in South Australia
South Australia saw the CCCI increase by 1.7% over the three months to December 2022, the lowest quarterly increase of all states.
The previous quarter saw residential construction costs rise by 3.8%, while the December 2021 quarter saw the CCCI increase by 1.1%.
Annually, CCCI figures show residential construction costs in South Australia have risen by 10.5% over the 12 months to December 2022, up from 9.9% over the 12 months to September 2022.
In comparison, the 12 months to December 2021 saw the CCCI increase by 7.9%.
COST TO BUILD A HOUSE IN WEST AUSTRALIA
In Western Australia, the latest CCCI showed construction costs rose 2.0% over the December 2022 quarter, down from 3.3% over the previous quarter.
While this is slightly higher than the national growth rate (1.9%), it is the lowest quarterly increase since December 2021 (1.1%).
Annually, Western Australia’s CCCI saw the lowest annual increase of all states, rising by 10.4% over the 12 months to December 2022, up from 9.4% over the 12 months to September 2022.
As with the other states, the 12 months to December 2021 saw smaller annual growth in construction costs across Western Australia (7.9%).
So how much can you expect to pay?
First up, the figures I’ve detailed above are just a rough guide, as building costs can vary significantly based on your location, the project design, and the level of the fit-out.
And remember, a builder’s advertised base price is generally only a starting point and does not reflect how much your home will cost when it’s 100% completed.
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.
And then there is the added recalculation needed depending on where the property is located, its size, and the quality of finishes.
It’s not as simple as getting one price quote - the cost of building a house varies widely depending on where and what you plan to build.
And this is even more so the case in today’s market where the cost of materials is consistently and steadily increasing, almost by the day.
Thanks to Australia’s rising inflation, almost every category of building materials has become more expensive.
For example, prices of steel products have surged 42.1 per cent in the year ending March 2022, according to ABS figures.
And that doesn't take into account the level of inflation and subsequent price increases which have occurred since March up until today.
And then the cost of an architecturally designed home to one built by a volume builder would differ again.
But to give a very rough idea, in April 2022 the figures from the ABS suggested that, on average, building a home cost around $473,000 (including houses and unit data).
The hidden costs of 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, upgrades, finishes, and fittings, your costs can increase significantly.
We already know that the breakdown of the costs to build a house would differ depending on the size of the property, location, and finishes, but what about the hidden costs of building a house?
Here are a few costs you might have overlooked.
1. 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.
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
According to the Urban Development Institute of Australia's (UDIA) 2022 State of the Land report, a surge in demand for new land underpinned a 6.0% increase in the national median lot price to $322,379 between June and December 2021 across the major capitals.
The most expensive greenfield market, Sydney, recorded a 14% increase in median pricing in 2021 with a year-end lot price of $543,750.
This median lot pricing increase was largely driven by a spike in September quarter pricing to $585,000 a lot.
After a two-year decline, Melbourne recorded an annual increase in median lot pricing, rising by 14%, to finish the year at $327,475.
Southeast Queensland recorded a 5% annual price uplift to $272,375.
At this median price-point level SEQ continues to hold an affordability advantage over the other two major east coast housing markets, being 50% cheaper than Sydney and 17% cheaper than Melbourne.
Perth’s median lot pricing grew a modest 1% to $215,2000 (which is the first price increase after six years) and the ACT also saw median pricing rise by 9% to $453,000.
Adelaide recorded a 2% annual price increase in 2020 to $187,250 and remains Australia’s most affordable market by some margin.
The increase in lot prices coupled with the minimal rise in lot sizing has delivered further slight increases in the price of land on a per square meter basis across most markets, the UDIA report also noted.
Sydney's land price recorded the most substantive growth with a 17% increase to $1,504 per sqm.
Melbourne’s land price also increased 8% in 2021 to $883 per sqm.
Southeast QLD recorded a 9% growth in land pricing to $679 per sqm.
ACT recorded an 11% rise in land price to $922 per sqm.
Perth's land price increased by a modest 1% to $574 per sqm.
Adelaide recorded modest growth in the metropolitan land rate with an uplift at $416 per sqm.
2. OTHER FACTORS THAT CAN AFFECT THE BUILD PRICE
Once you have signed a contract with a builder and decided on 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 finalized.
They are approved by the council and you are ready to make your final choices regarding all of the design aspects, such as wall colors, the types of light fittings, and the materials used on the roof and 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 roofs, 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, labor 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 a two-storey home).
Kitchen: If you’ve ever shopped for a kitchen benchtop, you know how widely the 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.
3. 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 organize is a soil test. They do this by drilling some boreholes 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.
The 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.
Government-building stimulus packages
Government-building stimulus packages, such as Homebuilder and other state-based programs, have provided extensive support to the housing sector, particularly for detached housing instead of apartments.
For the year to July 2021, 143,000 private detached houses were approved, the highest number of approvals over 12 months since 1984.
Approvals for all new dwellings increased by more than 25% in 2020-21.
And approvals for new houses rose more than 40%.
And while that is great news for people wanting to build or renovate their homes, the surge in demand has been near-devastating for the construction industry.
Since applications for HomeBuilder closed at midnight, Wednesday 14 April 2021, the number of dwelling approvals has nosedived.
ABS data shows that in May this year, there were 15,487 approvals, a 1.5% drop month-on-month but, significantly, a 23.4% drop year-on-year.
The drop in approvals was expected once the government stimulus (or over stimulus as some call it) ended, but perhaps what wasn’t quite as anticipated was the level of demand.
And it's this demand surge that has put pressure on the supply of key construction materials, labor, and equipment.
The pandemic outbreak around the world led to the closures of factories and ports, limiting production and delaying transportation.
These supply chain constraints have heightened the demand for available stock and inflated prices.
And the government stimulus only exacerbated this supply bottleneck.
This is evident with the ABS's producer price index showing that input costs for housing construction have increased by 15% over the past year.
Soaring prices are particularly concerning for builders locked into fixed-price home contracts.
Even with the lower number of approvals, demands on builders will remain great.
And as a result, we have seen at least 17 building construction companies go bankrupt across the country.
Melbourne-based building firm Langford Jones Homes were placed into voluntary liquidation.
And several other major residential construction companies have gone into liquidation too, including Probuild, Condev, ABG Group, and Privium, alongside several smaller players like Hotondo Homes Hobart, Home Innovation Builders, and Next.
Construction giant Metricon is also reportedly on the verge of collapse following the sudden death of founder and CEO Mario Biasin in June.
And a recent Equifax report shows that the significant increase in construction company failures since the start of the year shows no sign of abating.
Provisional data indicate that construction insolvencies increased 19% for the month of May, sitting 43% higher than last year (May 2021), attributed to the mounting pressures of disrupted supply chains, rising material costs, labor constraints, inclement weather, and project delays.
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 starting the works, they may discover large clumps of rock that need to be removed and leveled before the slab is laid.
Or when the builder starts digging your foundations they realize 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
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 cost 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.
How long does it take to build a home in 2023?
It’s not just prices that have shot up since the COVID-19 pandemic began, the time to complete construction has also blown out.
A renovation that would have previously taken 4 months is now taking 6-8 months, and a new build that would have been 6-8 months is taking 12-18 months.
That’s really putting additional pressure on both builders who need the cash flow and the consumers who might be paying rent on one home while the building takes place for another, or who have two mortgages.
Unfortunately, a number of building companies have folded, having signed fixed-price contracts earlier in the pandemic and not being able to complete their contracts.
The problem is that when it comes to the question of ‘how long', there are just too many variables.
And currently, there are ongoing construction delays associated with COVID-19, only adding to the time taken to build a house.
Then, there are the unforeseen hurdles that always seem to arise when building - things like unfavorable soil conditions such as rock removal, bad weather (of which there has been a lot this year, particularly in NSW and QLD), or waiting for certain permits or approvals.
Having said all of that, the average time to build a two-storey house is currently roughly 10-12 months.
Note: While the cost of building a home has increased, the price of purchasing an established home in Australia has also skyrocketed.
And there may be more price hikes to come yet.
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 that the builder has designed with cost efficiency in mind, or a unique home- your special castle which has never been built before
Collection From Varietes Source.
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