How much does it cost to build a house?

Australians are paying a premium to lay down bricks and build so they can have their own slice of the home ownership pie, new data suggests. One builder says the cost to build has gone up 5% in the past year, driven by pandemic forces.

Government-funded building grants with strict time limits for construction, a labour shortage and the 2019/2020 bushfires impacting timber supply to build housing frames are just some of the key factors contributing to a perfect storm that’s been boosting demand for home builds in Australia to levels one industry insider has described as “unprecedented”.

Australian Bureau of Statistics data for April shows private home builds were up 67.4% year-on-year, with the monthly change largely driven by builds in New South Wales, up 30.1%.

But with skyrocketing demand has come a higher price.

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

According to the Australian Bureau of Statistics’ latest data, the average cost to build a house in Australia was $320,238 in 2018-19, a townhouse was $280,228 and it was $358,448 to build an apartment. But according to local builders, prices have gone up considerably during the pandemic period.

In fact, Home Consultant Steve Condliffe from GJ Gardner Homes in North Sydney told Canstar the cost to build a house in Australia has gone up by around 5% compared to what people were paying at the start of COVID-19.

“If anything, it will get worse,” Mr Condliffe said. “That’s what will happen until the supply chain gets better.”

He said people were currently experiencing delays on builds of a couple of weeks, and builders needed to order supplies such as timber far in advance of the builds. As a result, he said it would be difficult to squeeze in jobs quickly at the moment.

But timber producers argue supply isn’t the only problem. They say materials providers can’t keep up with the unprecedented pace of demand for new home builds, spurred on by government incentives and eager builders.

“The HomeBuilder scheme has resulted in an absolute abundance of homes being built, and unfortunately the supply chain hasn’t been able to keep pace with many materials, if any,” Hyne Timber spokesperson Jeremy Mead told Canstar.

“Builders have signed up more homes than we have the labour or the materials to build.

“And it’s not just timber they can’t get a hold of. It’s roofing, it’s the kitchen materials, it’s bathrooms, it’s tiles, it’s flooring. You name a building material and chances are there’s not enough of it in the country.”

Hyne Timber is one of the largest timber producers in Australia, and typically produces some 1.5 million of the 2 million cubic metres of timber used in the country each year, according to Mr Mead. The remaining gap has usually been filled with imported timber.

But rising new home builds have seen demand for timber increase by approximately one third in Australia, he said.

At the same time, Mr Mead said Hyne’s timber mill in New South Wales was badly impacted by the 2019/2020 bushfires and, as a result, production has gone down, adding to the demand-supply imbalance.

And international imports are also a problem, with European and US housing market booms taking more of a share of the available timber supply around the world, adding to Australia’s supply constraints.

Mr Mead said US consumption of timber is expected to grow over the course of this year and next year by 14 million cubic metres, and global growth by 33 million cubic metres.

“Most governments have incentivised homebuilding and renovation as a means to stimulate their economy in the pandemic world,” he said.

“So yes, our prices have gone up, but they had to.”

Mr Mead said he expected prices to come back down again as the market cools, probably somewhere in the next 12 months. For now though, most of Hyne’s timber framing customers – who sell to home builders – are booked out for the next six months.

What are some hidden costs of building a home?

These are some of the unexpected costs that could crop up in a home build. Some may need to be tacked onto your building contract as a ‘variation’, which is an out-of-pocket cost, according to Mr Condliffe. Building contracts are typically fixed in price at the start and paid for with a customer’s construction loan, meaning any later variations to the contract are generally paid with people’s own money rather than requesting a top-up on their loan, he said, adding that it may be possible to pre-empt some of these costs with proper research and planning.

1. Bushfire protection

Builders work off a bushfire attack level (BAL) which is a rating of the severity of exposure to bushfire damage. “The lowest BAL rating [in bushfire-prone areas] is about 12.5, which is roughly $10,000 of work to do,” Mr Condliffe said. The higher the rating goes, the more requirements need to be made to make the property bushfire safe.

The highest level is a BAL of over 40, called FZ (short for ‘flame zone’), which goes outside the building code and could set you back up to $100,000 in construction to make the home safe and install steel shutters on every window and door, Mr Condliffe said. This typically applies to people living in areas that back onto bushland. “The whole thought process is when the fire’s happening you could stay there, not that you would. They call it a ‘shelter in place’,” he said.

2. Flood controls

Mr Condliffe said building to flood planning provisions in your area could see as much as $70,000 added to your build costs.

“The whole house has to be raised to whatever the flood level is, then the foundations need to be up to scratch and the property has to withstand certain forces structurally if it were to be submerged,” he said.

He said it was important to check how high the habitable parts of your home need to be built, as this could vary across different local council areas. Your council’s required height may be described as ‘freeboard’ and measured in a minimum number of millimetres above where a past flood reached.

Mr Condliffe characterised Australian bushfire and flood protection codes as generally quite stringent, saying that “to get a house now that’s built to one of these codes, you’re going to either have a bulletproof house from a fire perspective or you’re going to be quite happily fishing from your balcony when it floods.”

3. Soil

Mr Condliffe said a house built on flat sand “would require probably an extra $25,000 on the foundation costs”, or more if it was on a slope. “Because of the soil type you’re going to need to spend that extra money,” he said.

He said this cost could typically be built into the building contract from the get-go, but advised making sure of this upfront.

4. Hydraulics

Depending on the council area you live in and the type of land your home is being built on, Mr Condliffe said you may be required to have water storage tanks that could hold a certain amount of storm water and then release it at a slow, controlled rate, to limit damage to the surrounding area.

“Costs range from $5,000 to $25,000. It’s harder to work out upfront and often comes out later in the build, because you need to have a hydraulic design done,” he said.

5. Sewers

Encasing a sewer in concrete on your property could set you back about $1,000 per lineal metre, according to Mr Condliffe.

Sewers can cause issues in particular for people who are planning to build a pool. “If your sewer is three or four metres deep and you’re encasing it, you can put a pool on top of it,” he said. “But if your sewer is only 1–1.5 metres below the ground then you can’t put a pool there at all because it’s not deep enough.”

What to consider before you start building a house

Among the people who jumped on the home building bandwagon were Emma and her partner Corey, an accountant and plumber from Brisbane who built their first home between June and September 2020. They said they were lucky to get in before the building rush entered full swing and experienced a relatively smooth process, aside from a $2,500 unexpected cost from their pool company going under.

Some of their biggest tips to consider for others building their own home included being aware of and avoiding flood zones and bushfire areas, having a budget for landscaping at the end of your build (including spare cash for items like the washing line and mail box) and buying land that has a flat, compact soil type to keep foundation build costs in check.

“We joined a couple of Facebook groups,” Emma told Canstar. “Many builders have their own Facebook group that is not run by them but is just a discussion group where people talk about pricing and how much extra you should pay for this and that.”

Mr Condliffe said it could also be worth engaging a third party to review your building contract, such as a conveyancer or solicitor, along with an independent inspector to check that the house is being constructed properly.

He said having a home building consultant review the planning certificate from the real estate agent before even purchasing the land could also be useful in helping you determine any significant costs you could face.