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If you are designing your home and looking for a builder, there is no sure bet about the cost before the building is complete.
Even if you have a contract signed with a builder, the price may adjust. A perfect example is the construction cost escalation at 2021-2022 that puts large companies like Metricon into significant financial challenge.
So, if professionals can be wrong, what can you do?
Well, take steps to reduce your risk. Set some money aside as a contingency.
Here’s the steps to reduce your risk:
Step 1 – Understand the basics that drive the cost of buildings. Refer to this article. Click Here.
Step 2 – Find out the square meterage for construction in your suburb. We can help you with building in the Melbourne metro area. You can check with a local builder if your site is away from Melbourne Metro.
Step 3 – Trust the square meter rate. Sometimes, when you multiply 240 square meters (say your house size) by $2,500 per square meter, the $600,000 construction costs may sound high.
But if you are building a custom home, it is best to have that money available at the first place. You can negotiate with different builders and try to bring the price down.
You can rarely outsmart the market consistently, unless you're an expert in that field.
That is, if you are the developer who builds more than 10 houses a year. The time you invest, your technical expertise, and your relationship with trades can help you outsmart the market and bring the price down.
But if you are building one or two houses, it is unlikely that you can outsmart the market and build them a lot cheaper than the norm.
Further Questions & Answers:
If $600,000 is beyond my budget for my 240 sqm house, is there any alternatives?
The best way is to select a design from a volume builder's range. Volume builders have invested time, expertise and have the industry relationships that can "outsmart" the market, bringing prices down.
However, if you like to have your own tailored design house or if you need tailored building to maximize your site utilization, a volume builder's house often doesn't work in these situations.
If I'm adding new spaces to my home (extension & renovation), is there a way we can estimate the price?
Your best bet as a home owner is using the square meter rate from builders.
Note that three issues add significant costs:
- If you are only adding a small area (less than 50 sqm), the builder's admin and setup costs will be very high compared to the project.
- If you do a lot of interior work or remodel existing rooms, the square meter rate is inaccurate. That’s because you are not paying for the new building area; but rather, you are paying for the labour to remodel and rebuild the old house.
- If access to the new build space is restricted, labor costs increase.
How do you apply this knowledge?
When you work with your architect, at the end of the concept design stage, check the sketch and compare how many and how severe the above three concerns are triggered.
For example, if the concept shows lots of interior work, find ways to avoid that. Sometimes building more floor area to create the rooms that serve your need while avoiding remodelling the old house can be cheaper.
Quantity Surveyors
No one asked this question, but it comes to mind. Quantity Surveyors are experts that break down the building into individual elements. Quantity Surveyors know the market price of these individual elements, so they can add all cost together and find the likely total building cost.
There are two situations in which you employ quantity surveyors:
If price is important, employ a Quantity Surveyor to estimate the cost of construction works early.
If you want to be the owner-builder because you feel you can manage all trades, start with a Quantity Surveyor report. You will know a fair and reasonable price of the individual trades or elements, so that you don’t pay too much. And you also avoid the junkie who undercut prices and messes up your project.
Call or ask us a question if you want to learn more about your project.
Disclaimer: We assume no responsibility or liability for any errors or omissions. The information is for general purposes only with no guarantees of completeness, accuracy, usefulness, or timeliness. You must engage a suitable consultant for your specific situation.
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