THE COST CONUNDRUM

As we often say, “all projects go really well until the budget gets in the way”. The proverbial money pit of house building is not one you want to fall into, so now, more than ever before, we are spending time to estimate and re-estimate projects in the face of price increases.

Shortly into the New Year, I sent out an email to our clients pleading for patience owing to an over-worked, under-resourced and under-supplied industry. I offered some good news that price rises appeared to be drying up. No sooner had I pressed the ‘Send’ button I was struck by the Commentators Curse and a letter (printed on some nice hefty stock) arrived to inform me that various timber products were going up 10%-15% from April.

Before clients engage us, we usually run through a cost exercise to see if the project has legs. It goes something like this:

Non-construction costs. These are the fees incurred to get to the point where the house is ready to build. Such is the tight regulation, risk aversion and complex process involved, you will have had to fork out on engineers, designers, council and a myriad of different consultants (a client once claimed that whenever he heard the word ’consultant’ it seemed to come with a bill for $3,500). We usually see this cost between 8%-12% of the total cost of the project. 

Siteworks. This is the bucket of cost that most people underestimate or omit completely from their mental calculations. This accounts for the costs of infrastructure (water, wastewater services, water connection, power and internet), excavations, retaining walls, driveway, council vehicle crossing, foundations and pretty much anything to do with site establishment and preparation. Typically this ranges from $150k to $250k, though it is not uncommon to see this figure hit $400k if the site is steep or has expensive infrastructure or access requirements.

The House. Finally something to show for all that money spent! It’s difficult to know who to trust with these numbers and there is a large range of variation. All I can recommend is that you ask around – from an architect through to a house company, and ideally someone who has recently built a house and will be honest with you. And make sure GST is included…

Like all builders, we have had to revise numbers upwards, so the general back-of-envelope number we trot out is $5k-$6k per square metre. So if it is a 3 bedroom house with double garage at around 170sqm, that would be around $950k for the house component (inclusive GST).

The Externals. Lastly, and the final bucket of pain is the decks, terraces, paths, fences, landscaping and all the miscellaneous tidy ups. This is ‘on average’ around $50k-$100k, though a fully implemented landscape design plus pool can set you back $250k.

All this to say that as of writing, we are seeing a 3 bedroom house of a good Box specification and design, costing around $1.1m to $1.4m as a total project budget (inc. GST).

Value Engineering

This simply means ‘taking cost out’. And it’s something we increasing focus on, using our skills as designers builders and in-house cost estimators to offer options on how we can tweak designs and specifications to reduce the cost without compromising design. We can’t work miracles, but one of the key benefits of using an all-in-one company like Box is that we have the resources (and experience) in-house to take projects and squeeze the most value out of them that we can for the customer.

Having searched for years to find the silver bullet to reduce costs, including standardisation and pre-fabrication, if there is one to be found it is size. Size matters when it comes to cost and is the simplest way to reduce it. Our ethos has always been a focus on design quality over size. We also work with our build team to make sure that what is being designed is also practical to build.

A final thought: a house is a ridiculously expensive thing to build, particularly if it is only around for 50 years versus a house that is around for 100yrs. The difference? One is probably built using better materials and has a better quality design, meaning it is loved for longer, maintained and changed rather than being bowled (we just demolished a house built in 1992 – it is a travesty). Unfortunately we don’t tend to think of an investment in those terms so that quality is a hard sell for many (and many ‘fashion statement’ architectural homes don’t qualify either – there is no guarantee of build quality or accounting for change of fashion).

If you have a project in mind and want some cost advice, feel free to reach out and we can run through this process with you to see what costs may look like for your particular project. Contact us

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