How to save money when building a house

By loans.com.au

First published 11 May 2023

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Thinking about building your new home? Make sure you’re armed with all the facts before you jump head first into your home construction.

Here’s what you need to know when building your own home:

The cost of building a house in Australia

According to the Australian Bureau of Statistics, the average costs of a home build is estimated at $473,000. Every state varies with some being more expensive than others. The estimated average cost per state and territory according to the ABS in 2023 is as follows:

Location	Average Building Cost
Australian Capital Territory (ACT)	$440,000
Northern Territory (NT)	$365,000
New South Wales (NSW)	$349,000
Victoria (VIC)	$327,000
Western Australia (WA)	$298,000
Queensland (QLD)	$289,000
Tasmania (TAS)	$285,000
South Australia (SA)	$275,000

On average, the building costs in Australia may range from $1,300 to $3,900 per square metre. This is dependent on the type of materials used, the size of the house, its location, economic conditions and other significant factors.

Knowing these estimates can give homebuyers a better idea of what to expect when it comes to their own home construction.

Common factors that affect building costs

There are a lot of factors that affect the cost of your home build. Understanding how each one of the following may affect total costs can help you save money during the construction.

Location – Costs may vary depending on the neighbourhood or suburb you want to build your house in. Areas in or surrounding the city can be more expensive compared to rural places. For example, if your home is found in a bushfire-prone area, you’ll need to meet more requirements that could be costly.
The plot of land – If your parcel of land is built on a steep incline, then you will likely pay more because of the difficulty of the terrain.
Size – A three-bedroom, one-bathroom bungalow is going to be infinitely cheaper compared to a two-storey single-family house. When deciding on your home’s features, cutting out unnecessary amenities could save you a lot not just in building costs but maintenance, as well.
Labour – This typically makes up around 40% of your house construction cost. Thecost of labour depends on the availability of skilled workers and the location.
Materials – Imported and high-end items will cost you more compared to ones that are locally sourced. Look at the options available to you and decide which materials best suits your needs.
Design – The more complicated your home’s design is, the more expensive it’s going to be. You can still build a beautiful home without cutting corners. Talk to your builder about the best course of action.
Soil quality – This is an often overlooked, but quite integral factor of home construction. If the soil of your property is difficult to work with, it may need to be fixed which could mean more expensive building costs.
Timeframes – Delays on the home construction deadline could end up costing your more because of additional holding and labour costs.

Aside from these factors you should also consider landscaping, fencing, and local council costs into your budget. These could potentially add up to thousands of dollars so it’s always best to include them into your calculations at the very beginning so you don’t risk overspending.

Global supply chain issues and labour shortages impact construction costs

External factors also have a huge impact on house construction costs. Interruptions to the global supply chain can negatively impact prices of materials.

With previous COVID-19 restrictions and border closures coupled with the war in Russia and Ukraine, the cost of construction materials has increased significantly. Average costs of materials like timber, reinforced steel, and plastic piping rose around 20% to 40% in the past few years.

In addition to high prices of construction materials, Australia’s shortage of skilled labourers also impacted the rise of construction prices. This has also contributed to building and construction delays because of the lack of workers.

The timing of your house build could also dictate how much it’s going to cost. Keep abreast of the latest news to know what to expect when you’re ready to build your own home.

How to save money when building a house in Australia

Building your own home doesn’t have to be too costly. If you play your cards right and budget efficiently it could be cheaper than buying an already-built home. Here are the top ways to save money on your home construction:

Know how much you can afford

Getting your finances in order is a great way to build a budget and keep yourself from overspending. Get pre-approved for a construction loan to know how much you can comfortably afford. Don’t stretch out your budget too thin and make room for a safety net. It’s better to work at the lower end of your budget in case any issues arise.

Shop around for the best builder

The builder you choose could help you make your dream home come true. Or turn your home construction into a veritable nightmare. Suffice to say, you need to choose wisely.

When selecting a builder, ensure you find one that understands your needs and can work collaboratively with you. Check out different builders in your area and review their most recent works. You can check out their website or look at reviews online to gauge previous client satisfaction. Get quotes from different contractors and see if you can leverage them to get the best price.

Remember, a good builder is there to help you, not cause you more headaches. Interview them first and ask for references. It’s important to find someone who communicates well, is honest about the construction, and who help you manage costs.

Know the hidden costs

In addition to building fees, you’ll also have to pay for permits, inspection fees, moving expenses, landscaping, and more. Always include these into your budget so you won’t get any nasty surprises as you go about your home construction.

Keep it simple

Embellished finishes like polished-concrete floors, cathedral ceilings, concealed gutters, or ornate cornices are premium features that will cost you extra. If you want to cut costs, you need to keep things simple. This doesn’t mean doing the bare minimum for your home. You can still add flair with smart design choices and splurge on features that can help improve your custom home’s total value.

Stick to the plan

Avoid changing your mind or making amendments to original plan. Check the construction plan and raise any issues or concerns before the start of construction. Once building has commenced, it's going to be difficult for builders to accommodate changes which means paying extra on labour costs and additional materials.

Scope out the appliances yourself

Shop for ovens, stoves, sinks, and other appliances and fixtures yourself. It might be more convenient to have your builder fit your home with appliances and fixtures for you, but you have the potential to save a lot of money by buying these yourself. Look at different stores and retailers, you may find exactly what your home needs on sale.

Using these tips, you can make the most out of your home construction and get the best deal.

Advantages and disadvantages of building a house

Home construction has its benefits and drawbacks. The important thing is knowing about them and understanding how each one affects your situation. Make an informed choice by keeping these pros and cons in mind:

Pros of building your own home

Save on stamp duty – You only have to pay stamp duty on the purchased land and not the construction of the home.
Incredible customisation – You can build your home to meet your needs exactly. You have the freedom to really make your home your own.
Expect less maintenance – Since your home will be brand new, it won’t have the wear and tear that established houses often have.
More energy efficient – It’s easier to install energy-saving and eco-friendly appliances with a brand-new home. Plus, you can choose greener materials and have environmentally-efficient features installed during construction.

Cons of building your own home

It takes a lot of time and effort – It's going to take a while for you to move into your new home. Unlike established properties, you will not be able to move into your home until construction is complete, which can take up to a year, sometimes even longer.
Timelines can be moved – Deadlines don’t always stick when building your own home. There might be construction issues, shipping delays, and the like that could set back the whole home build.
Budgets could balloon – If you’re not careful, those little tweaks to the building plan or add-ons you ask your builder to install could end up costing you significantly more.

Make sure you know what you’re getting into when you decide to build a house. Going in with the right expectations will improve your experience and expediate the process.

Ways to finance your house construction

If you’re eager to get your home construction project started, here are ways you can finance your home build:

Government grants

Australia offers homebuyers a number of grants to help them build a home. Some initiatives include:

First Home Guarantee (Available nationwide) – You can offset some of the upfront costs of buying and building your first home, as long as you’re eligible for the guarantee.
Home Buyer Concession Scheme (Available in ACT) – Helps buyers with the cost of land. You’ll be able to set more money aside for the home construction.
Grant for first home buyers (Available in NSW, NT, and SA) – Depending on the state or territory, you’ll be able to get a grant for costs relating to a new home and stamp duty of up to$10,000 or$15,000.
Grant for first home buyers in VIC – In addition to stamp duty concessions, eligible buyers are given a $30,000 grant to put towards building a new house.

Construction loans

A construction loan is the loan you take out when you want to construct your own property or for renovations.Unlike a mortgage where the lender gives you money to purchase a property, a construction loan is paid out as the construction of the home is ongoing. After a stage of the build is finished, the lender will arrange an inspection and pay the builder for that portion of work. This continues until the final phase of the home construction is complete.

You’ll only be paying interest on the amount that’s been paid to the builder. For example, the builder was paid $50,000 after the first stage of the home construction. You’ll only pay interest on that $50,000 payment. Once all payments to the builder have been made, you’ll likely then switch from interest only payments to principal and interest payments.

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