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How much does it cost to build a house in 2022?

It’s a seemingly simple question with a complicated answer: how much does it cost to build a house in Australia?

The ABS revealed that over the 15-year period between the 2004-05 financial year and the 2018-19 financial year the average house costs just over $320,000.

However the current figure is most likely higher due to increased construction costs amid supply chain issues caused by the global pandemic. This is also causing building approval rates to fall.

In April 2022 the figures from the ABS suggested that, on average, building a home cost around $473,000 (including houses and unit data).

From the location, to the size and cost of the block it's built on, to the finishes selected and even the impact of COVID, there’s a lot to consider when looking at the cost of building a home. Let’s break it down:

Cost of the land

Average cost of building a home per square metre

Average cost of building a home, state-by-state

6 factors affecting costs

How global supply chain issues are affecting construction in Australia

COVID-19 construction and renovation subsidies

The cost of the land

The first thing to consider when calculating how much it costs to build a house in Australia is the price of the land for the house to sit on, which varies hugely from state to state.

According to The Urban Development Institute of Australia’s 2021 State of the Land report, in 2020, Sydney’s median lot price was $495,000, Melbourne’s was $319,000 and Adelaide’s $183,460.

The average cost of land in Sydney was $1285 per sqm, Melbourne $819 per sqm and Adelaide $400 per sqm.

Average cost of building a home per square metre

While the cost of building is influenced by many factors including location, site, finishes and design Hipages put the 2022 cost between $1300 -$3900 sqm.

However, this figure doesn’t include design, planning permits, any site works or any cost blow-outs.

According to this ABS report, the average dwelling in Australia spans 248sqm, which puts the cost for the build portion at $320,238.

There are many factors that make up the price of a home build. Picture: realestate.com.au/buy

Wolf Architects director Taras Wolf, on the other hand, said the cost of building an architecturally designed house starts at a minimum $3000 per sqm, right up to $5382 per sqm or $50,000 per Australian house square (9.29sqm).

Mr Wolf said it is difficult, if not impossible, to compare the cost of an architecturally-designed home to one built by a “volume builder for as little as $1600 per sqm.”

“The higher price of architecturally-designed homes is due to the nature of each one being essentially a one-off prototype, because no two clients, site or requirements are ever truly the same. It’s not necessarily related to materials of quality, it has more to do with time,” he said.

While he declined to put an average price on building with a large builder because of the many variables, Hotondo Homes’ general manager of building and operations Nicholas Erbacher said his company’s designs are “architecturally-inspired to deliver a stunning home at a lower cost.”

The company offers more than 90 flexible floor plans, which clients can adjust.

“As a national franchise network, Hotondo Homes’ builders encourage clients to select a design from one of three ranges,” Mr Erbacher said.

Supplier partnerships with brands like Beaumont Tiles, Haymes and Colorbond help achieve this “reasonable pricing.”

Average cost of building a home, state-by-state

Source: ABS - Characteristics of new residential dwellings: A 15-year summary, April 2020. Building Activity Australia December 2019 data.

Factors affecting building costs

The cost to build a home is influenced by five key factors:

1. Size of home

The average home in Australia is around 195.8sqm according to a report by Commsec, has three bedrooms and sits on around 470sqm of land.

But the size of the average new build was considerably larger - around 235.8sqm - which means Australians are now building the world's biggest homes.

Mr Wolf said a larger house with more bedrooms naturally requires more materials, more labour and occasionally more specialised equipment.

2. Quality

When building a home it may seem obvious that the basics should be covered, which means you get a safe, comfortable dwelling at the end of the process.

But in reality everyone's idea of quality can differ so it's important to come to a good understanding with your builder around the fixtures and finishes.

While it's true that higher-quality materials mean better finishing and craftsmanship, which increase build costs, the reverse can also be expensive.

By selecting cheaper and lower-quality materials you may find the overall cost is higher as you'll need to pay for repairs and replacements.

So speak with your builder about a realistic cost for the home you're after and avoid cutting corners to reduce costs.

3. Site considerations

Mr Wolf said the terrain and condition of the land being built on also has a big impact and, often, an architect is best placed to maximise a lot and floor space.

The quality of finishes will affect the final cost of a home build. Picture: realestate.com.au/buy

The site is the one factor that the builder and/or architect will have to manage - often with the help of an engineer when required - and costs will be outside of the control of the client.

“If you’re in a situation where you need to reduce costs, compromising on the quality of your foundations is not the area, you can always upgrade your doors in the years to come, but you can’t upgrade your concrete slab,” Mr Erbacher said.

“The location of your home can also impact the cost due to council requirements and planning overlays.”

4. Timeframes

Timeframes also affect what resources are required for a build, Mr Wolf said.

Especially amid supply-chain issues timeframes (and budgets) are being stretched due to shortages in materials across a range of suppliers.

When there's a delay in material it can cause the whole project to stall, which means the client is paying more in holding and accommodation costs.

Furthermore builder will have to divert his team of tradespeople to start work on other sites, which can mean it's difficult to get the project aligned again.

5. Complexity of design

It should go without saying that the simpler a project is the cheaper and quicker it is to build; while the more complex designs will cost more and take longer to build.

Budget blow-outs are not unheard of and can generally be attributed to changes made to original plans.

If you're building with a volume builder it's generally cheaper to stick with the standard inclusions.

You may choose to upgrade the existing inclusions such as adding more storage, insulation, stone benchtops and luxury flooring, but remember these will increase the initial build costs.

6. Additional expenses outside of building costs

It's also important to remember that the price of building often doesn’t include optional extras like landscaping, fencing, swimming pools and local council costs, which can also add tens of thousands of dollars.

How global supply chain issues are affecting construction in Australia

COVID-19 has changed the landscape for the building profession in a variety of ways, from supply chain and productivity issues to border restrictions, so project completions have been slower and more expensive on average during the pandemic.

Worker shortages are causing even further delays on projects amid the renovation 'boom' caused by Australians spending more time at home due to the global pandemic.

There are a number of issues that have arisen in the post-COVID landscape that builders are now facing.

While government grants for both businesses and consumers were a lifeline at the time and ensured many builders were able to continue operating in 2020-21, these have largely finished up.

Here are a few of the issues builders are facing now:

Building costs include factors such as location, size, finishes and design.

1. Rising cost of materials

Rising supply chain costs are having the biggest effect on the building industry in the post-COVID landscape.

Most client contracts are signed well ahead of work starting, with costs locked in at that market price. This means that a year down the track when work actually commences builders are having to absorb these prices without passing them on to the client.

One regional builder told realestate.com.au that the cost of materials had risen between 15% and 45%, with some suppliers raising their costs three or four times within a few months for the same item.

Furthermore, some items (such as specific kinds of timber), that are specified in building contracts when signed simply aren't available now.

In other cases builders are faced with higher costs for the same materials. From the client's perspective the item may be available but it's the builder that will have to pay new higher fee, even if the price is 10 times higher than it was when the contract was signed.

"Margins are becoming so thin," the business owner said. "Contracts don't allow any movement for passing costs onto client so we're relying on being able to increase the margin on the next job, simply to survive".

"All it can take is for one client to be late on a payment and it can spell the end of the business"

"Some builders are giving back contracts and walking away from jobs, potentially being taken to court, rather thank risk losing everything."

The business owner said more builders are being forced to change their legal strategy when it comes to taking on new work.

A contract type called Cost Plus, where the client can be billed for hours and labour with the builder charging for materials at the end of the job - rather than the beginning, means they don't run the risk of losing money.

This type of contract is much more complicated with administration, however, as it requires a detailed monthly report to be submitted to the client as the job progresses.

2. Delays in materials arriving

Delays in freight shipping also cost the builder money as they're forced to push out build timeframes, spending more time on one job before they're able to move onto the next. They also need to pay employees regardless of whether work can be completed.

Penalty rates in contracts cannot legally be charged unless formal notices, called Extension Of Time notices, are served to the client regularly - which requires a lot more administrative labour.

Sometimes these are items that normally would be able to be picked up at a local hardware store, other times they're specific elements of larger products, such as the foam between double-glazed windows.

Even a small component, if missing, can delay the entire project.

COVID-19 construction and renovation subsidies

In the 2020/21 financial year, the federal and state governments provided subsidies to help home buyers and to encourage people to build and buy amid the COVID-19 pandemic but they've largely finished up.

HomeBuilder grant

The Morrison Government’s HomeBuilder Grant for new builds and significant renovations came to a close on April 14, 2021.

But if you’re one of the 121,363 people who applied for a grant, the government has extended the construction state date from six months after contracts were signed to 18 months.

This article was originally published on 23 Jun 2021 at 4:00pm but has been regularly updated to keep the information current.

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