2021 and 2022 have seen an unprecedented rise in construction costs. During this short timeframe the built cost has jumped up around 30 – 40%.
In comparison to that, between 2016 and 2020 and the cost went up by about 8%.
So, the big question is: What will happen to construction costs over the next years?
Should you wait with your build project? What should you do?
I had a great discussion with Katie Rees, the Home Build Mentor in November 2022 where we spoke exactly about this.
She has done a lot of research into the build cost. Where the market has been and where it is going to.
Here an excerpt from her BUILD COST F O R E C A S T Q U A R T E R 3 – 2 0 22
“Each quarter the Australian Bureau of Statistics (ABS) release data pertaining to inflation in Australia. The data I will reference in this report is for ‘House Construction Australia’.
Between 2016 & Mid-2020, the average increase in residential construction costs was 0.5% per quarter, generally in-line with inflation.
This meant that if a home were designed successfully for an anticipated budget of $1M, and the planning and construction documentation process took 18 months, the actual construction cost would likely be about $30k more due to rising construction costs.
Bringing it to approximately $1.03M. That $30k could then be accepted, or the specifications adjusted marginally to bring the project back in line with the preferred budget. Not too much movement.
But fast forward to 2020, and it is a very different picture.
From Mid-2020 until QTR 2 of 2022, there has been a steep and steady increase in house construction costs, peaking at a rise of 6%.
In better news, the latest data released for QTR 3 of 2022 shows that the rate of increase is trending down for the first time since QTR 1 of 2021. So that’s something!”
Katie Rees also predicts that the build cost will stabilise and settle around mid-2023. And that the in the next 2-3 years the construction cost will go up ‘only’ 5-10%. Sounds much better than 30-40%, right?
But one thing is fairly certain, unfortunately, that costs won’t come down…Or at least not by much.
Anyhow, when it comes to the build cost, or building a home, there is probably never quite the perfect time. Same as when it comes to buying a home or having a baby. There is no such thing as the perfect time.
You never know; there could be another natural disaster around the corner. That leads to more demand.
Materials could continue to go up. Nobody knows.
There is no guarantee that the build cost will go down. So, you might be waiting for years just to find out that the cost indeed did go up.
But I think it really should come down to your own personal situation.
The important questions are:
Have you done your homework?
Do you know what you want?
What are your ‘must haves’?
What are your ‘would like to haves’?
Do you know how much money you can spend?
Do you have a security buffer?
Have you looked at the construction cost figures? And thought about how much the construction might cost by the time you will be able to sign a build contract?
You also need to factor in a bit of flexibility into your design and budget.
So that you can shift and adjust if the market changes.
Furthermore, you have to design your building more efficiently. LESS IS MORE!
The more things you can remove from your design, the more money you can save.
Like steel and steel products, for instance, they are notoriously expensive.
Not only is it good to remove or minimise steel in your Passive House, to avoid thermal bridges. But it can also take out some of those unknown costs. But obviously, the smaller your house, the less material and labour is required to construct it.
When you can come up with a simple design, likewise that makes the process for the builder on site a lot easier.
A home can look and feel bright and spacious without being huge. And you can design a beautiful and modern home without having everything custom-made.
Labour is what’s expensive in Australia. Hence the more labour intensive your home, the more it will cost. The more you can rely on off-the-shelf products and materials, the more money you can potentially save.
You can use prefinished or premade claddings that come in big sheet sizes rather than needing to be installed with individual battens.
Or you can get off-the-shelf kitchens, vanities, bathrooms, mirrors and so on.
Another great option to reduce labour costs is to look at a partial or full pre-fabrication of your home.
Sadly, in most cases, this is still more expensive than building a home the standard way. But obviously, the construction goes much faster. Meaning you will save money on interest rates and/ or rent. So, it might still be more feasible to do so.
Worth looking into it
If you are still not sure what to do, I would recommend reaching out to Katie Rees. To see wherever your ideas and budget align, prior to engaging a designer or architect.
Or, if you roughly know how much you can afford, but are not sure whether you can achieve all you need within the possible size of your home. Please get in touch with us and enquire about our FEASIBILITY DESIGN REVIEW.
This is a service where we will come up with a rough sketch design and master plan of your home. We will then discuss the design with some builders and run it past a quantity surveyor. To give you some peace of mind that what you want is achievable within your budget prior to signing up on a full design and documentation package.