Thinking of building a new home? What does it cost and why have prices sky rocketed?
Building a brand-new home is a fantastic experience, and one that I recommended everyone do in their lifetime. Why? Because, just like you, a brand-new home is unique in its personality and you can shape it to fit what you want. Unlike when you buy an existing home, you need to fit in with what is there.
But at the moment there is a lot of media about how much the costs have gone up, and worse still, of large builders going bankrupt, leaving many home owners stuck with projects that haven’t started or part-way completed with no way to finish and a mortgage to boot.
This has forced many lenders to make changes to their construction loans. For example, you used to be able to build a new home up to 95% LVR under the federal government’s First Home Guarantee Scheme. Now lenders have reduced that to 90% just because builders may go bust part-way through the construction.
How much does it cost to build a home in each state?
The saying ‘how long is a piece of string?’ comes into play here as houses vary so much it is difficult to place a figure on it. It differs by location, size, cost of the land, the type of finishes, how many stories. It is clearly not a one size fits all arrangement. However, here is a broad breakdown based on a report produced by surveyors Rider Levett Bucknall:
So, if you’re building a 300m2 house in Melbourne it would currently cost $600,000 to $1,290,000.
How much does it cost per bedroom?
To break it down to a per/bedroom cost is a little more difficult given the variations involved. However, it would look something like this:
$1,300 per square metre for a 3-bedroom weatherboard house on a level block, using budget materials
$1,600 – $1,900 per square metre for a 3-bedroom full brick single level project home, on a level block, using mid-range to high-end materials and finishes
For a 4-bedroom house, the costs would look like:
$1,900 per square metre for a 4 bedroom single level, brick veneer home on a level block, using budget materials
$2,900 per square metre for a 4 bedroom full brick two-level home on a level block using top-quality finishes
$3,900+ per square metre for an architect designed 4 bedroom full brick, two-level home on a level block using top-quality finishes
Why are the costs increasing so much?
There is no one answer except to say Covid started it all and the war between Ukraine and Russia didn’t help.
Covid reduced productivity, held up materials and impacted supply chains. The conflict in Europe drove up the prices of fuel and transport and the costs to make materials.
The cost of labour rose as immigration stalled and to help keep the construction sector bubbling along during covid lock downs, the federal government provided incentives, which artificially inflated demand – contributing to the shortage of labour and materials.
The rate of increase is slowing but there is still a backlog of projects and labour is still short. This is compounded by the collapse of building companies, which is keeping costs elevated.
If you’re thinking of starting a new home project, I can help guide you through the process of obtaining finance you need and the best loan for you.
Feel free call anytime, or book a chat today.