A guide to understanding the hidden costs in residential construction
Building a home should be an exciting and enjoyable experience. Although without proper knowledge from the outset, costly surprises can often arise during construction.
Below is a guide of the things most overlooked by the unassuming buyer which can add significantly to the cost of construction. Use this guide to ask the right questions when building and ensure your building experience is smooth sailing.
Site works are one of the largest hidden costs most overlooked in residential building and in some cases can amount to over $50,000. In particular, common items that may surprise incurring additional costs include;
- disturbed or unstable soil
- building over sewer or stormwater pipes
- rocks below the ground
- building to boundary (especially for narrow lots)
- retaining walls
- removal of trees
- site access
When signing the building contract, knowing your inclusions and exclusions is essential. Often the most simple things are assumed to be in a contract, but are actually excluded, such as:
- floor coverings
- light fittings
- fly screens
- overhead cupboards in the kitchen
Your inclusions should be complete turn-key such that everything you need to move in is incorporated in the cost.
Interest & Holding Costs
When budgeting for your building project, do not overlook the interest and holding costs (rates, insurance etc.). Plan for timeline blowouts as delays may be caused by pending council approvals, weather and the holiday period.
Have your construction financier forecast a schedule of repayments. Ask about interest capitalisation so you are not out-of- pocket for repayments during construction.
Building on a Slope
As a very general guide, allow $5,000 – $10,000 extra per metre of fall across the building pad, for moderate grade slopes. Extreme grade slopes require specialised designs, such as pole homes or split-level homes.
Overlays and Covenants
Council overlays and estate covenants are particularly important to keep in mind as they will affect the requirements for building certification.
Some overlays that are common for adding extra costs include:
Character – some councils have character overlays, which outline the acceptable facade (street facing side) options on a home you choose to build.
Flooding – blocks in flood prone areas may require raising of the home or additional site fill depending on the type of flooding.
Acoustic – this is a very common requirement – see hidden cost #6 for more details.
Bushfire – the Bushfire Attack Level (BAL) affects the permissible designs and materials.
New housing estates will often have building covenants that must be adhered to, such as the type of facade, or front fencing materials.
Building in proximity to a train line, major arterial route or busy road will almost certainly require additional noise insulation upgrades, such as double glazing and insulated walls. These upgrades often quickly amount to well over $5,000.
Some sites will require traffic management during construction, particularly if located on a busy road.
When the site has been purchased without utilities connected, additional connection fees will be incurred. Depending on the location of the main sewer and stormwater lines, this can cost several thousands.
Prime Cost and Provisional Sum Items
Prime Cost (PC) and Provisional Sum (PS) are allocations in your building contract for a particular item (such as tap fittings, appliances etc) or service (such as excavation). These allocations are estimates only and the real cost can vary significantly. More on this topic can be found here.
How to mitigate the Hidden Costs of Building
- Ask your builder the right questions
Use our checklist and ask the builder questions such as
- Does my contract have a site cost allowance? What is covered by this?
- Is there any overlays or covenants on my block? What cost will this add to my contract?
- Will extra noise insulation or traffic management be required? Is this cost included in my contract?
- Is the utility connection cost included in my contract?
- What is the expected completion (handover) date? What happens if this is not met?
Council websites can also provide handy information on flooding and other overlays.
- Ensure your building contract is fixed price and inspect carefully before signing
Know exactly what is included and excluded in your contract. Be very specific and ensure that all items which you require are included. Research and ensure the prime cost and provisional sum estimates are reasonable.
Contact us and we’ll happily provide a second opinion and pricing comparisons on your contract.
- Contact Built Easy for a Building Needs Analysis
We will guide you through a step-by-step process to avoid all of these potential pitfalls and design a fixed-price home package to suit all of your requirements – jump on our website for more information at www.builteasy.com.au.
Above all, being aware of the potential traps and keeping in constant communication with your builder is the key to an enjoyable and successful building experience.
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