Opinion

COMMENT: The true cost to build a house

Think price-per-square-metre gives an accurate idea of the cost to build a home? Think again! Landmark Homes’ Warwick Aldridge* explains what’s not included – and what to look out for when comparing quotes.

Friday, October 02nd 2020

Landmark's Warwick Aldridge

When it comes to shopping around for a new home builder in New Zealand, one of the very first things most people do is ask for “price per square metre” quote from every potential builder.

Unfortunately, most of the time, that isn’t a good indication of the actual cost to build a house.

While one company may offer a cheap square-metre price, they haven’t necessarily provided any more detailed information around what would be required to actually complete the build, rendering the figure almost irrelevant – and certainly not a true reflection of the real cost to build.

And where housing companies will initially advertise a square-metre price of, say, $2800, you often find out later that that’s a “floor-up” quote (so doesn’t include things like foundations, drainage, and earthworks).

What are the hidden costs your “price per square metre” quote may not cover?

The actual cost to build a house in New Zealand is heavily dependent on the site itself, and each site can bring hidden costs.

Before you begin to build on a site, you must do a certain amount of earthworks to get it to the state where you can even build your foundations. That includes retaining walls that are outside the cost of the house itself, to hold a bank up or make a level platform.

This could be an additional $10,000 or even $100,000, depending on your site and how the house fits onto it.

Foundations are another obvious hidden cost. Is the site on a slope? If it is, foundations are going to be more expensive than on a flat site. What is the condition of the ground?  Is it stable enough to support the new home or are additional foundations required? 

This comes down to design, too: Are you designing your home to fit the site as economically as possible? Or will you modify the site to accommodate your dream design? All of this will add to the cost to build your home.

Living rurally? There’s even more to think of. You must allow for sewer treatment, since your site will not be connected to the council system, and you need to put in a water tank and deal with stormwater. Between these two things, you can add another $40,000 to the build price!

These are all compulsory costs that many build companies don’t tell their clients about when they provide cost-to-build quotes. This is a problem, because you must complete them in order to be Code-compliant, so you do have to budget for them.

“Nice to have” costs to build a house vs “must have” costs

We’ve touched on the unavoidable extra costs involved in building a house and bringing your dream home to life – all involving the ground and the site. Most of the other things that can affect the cost to build are client-directed choices.

Floor coverings are a large variable cost; there are vast differences between the various floor coverings we can use when building and costing a house. Even with carpets, you’ll see a big difference between the different grades of carpet available.

These are all completely client-directed decisions and variables, which have nothing to do with the building code or compliance.

But you should be aware that some building companies can compromise on quality of materials and fittings to achieve a cheaper price per square metre.

Why you should always Geotech test your site first

The last thing you want is a house build to come in $100,000 higher than expected because of an unknown earthworks issue! To mitigate this risk, you should get a Geotech test on a site before going to contract. 

Since most unknown variables when building a house have to with the ground and site, without a Geotech test, the cost to build is more like an “educated guess.”

And at +/-$2000, it’s a small investment that gives a great deal of surety and peace of mind around the real cost to build.

With a Geotech test complete your builder can then discuss with their client what level of specification they’re expecting for the house itself, which is generally based on their budget, and cost out the house according to this.

Transparency on pricing means you can trust your building partner

Ultimately, a good builder should be completely transparent and indicate what the actual cost to build is going to be - rather than offering a weak, watered-down square-metre price that’s not actually meaningful. 

*Warwick Aldridge is a registered master builder and the owner of the Landmark Homes West Auckland/ Central franchise.

Comments

On Friday, October 02nd 2020 11:09 am Janice111 said:

That was a very good article for those that didn't know or realise all the points that were brought up. It's common sense made known - unfortunately quite a lot of people don't have common sense. They don't do their homework first because they find it boring, then come up into surprises and cost overruns.

On Friday, October 02nd 2020 12:01 pm Keith Jones said:

I can totally vouch for Warwick and his team. They have the knowledge and experience to help clients make informed decisions before they sign the bottom line. If clients are looking at a new build, I would have no hesitation recommending Warwick or Landmark to any prospective clients as based on my experience they will be in good hands!

Heartland Bank - Online 1.99
Kainga Ora - First Home Buyer Special 2.25
HSBC Premier 2.45
ICBC 2.45
TSB Special 2.49
Westpac Special 2.49
Kiwibank Special 2.55
SBS Bank Special 2.55
The Co-operative Bank - Owner Occ 2.55
AIA 2.55
ASB Bank 2.55
Heartland Bank - Online 2.35
SBS Bank Special 2.49
HSBC Premier 2.60
ICBC 2.65
China Construction Bank Special 2.65
TSB Special 2.65
The Co-operative Bank - Owner Occ 2.69
AIA 2.69
Westpac Special 2.69
ANZ Special 2.69
ASB Bank 2.69
HSBC Premier 2.89
SBS Bank Special 2.99
The Co-operative Bank - Owner Occ 2.99
AIA 2.99
Westpac Special 2.99
BNZ - Classic 2.99
ICBC 2.99
ASB Bank 2.99
China Construction Bank Special 2.99
Kiwibank Special 3.19
TSB Special 3.19
Heartland Bank - Online 2.95
Resimac 3.39
Kiwibank - Offset 3.40
Kiwibank 3.40
Kiwibank Special 3.40
Bluestone 3.49
ICBC 3.69
Heartland 3.95
The Co-operative Bank - Owner Occ 4.40
The Co-operative Bank - Standard 4.40
Kainga Ora 4.43

More Stories

Education for landlords by landlords

Friday, October 23rd 2020

Education for landlords by landlords

Self-managing landlords are signing up in droves for the NZ Property Investors Federation’s new education programme which aims to help landlords run their properties like professionals.

What lies ahead for investors

Wednesday, October 21st 2020

What lies ahead for investors

Election 2020 is done and dusted – and a red landslide has left the Labour Party firmly in charge of the next government. But what could that mean for property investors?

COMMENT: Dunedin’s slowdown might last

Thursday, October 22nd 2020

COMMENT: Dunedin’s slowdown might last

Dunedin’s loss of value growth momentum in recent months could be a longer lasting trend, writes CoreLogic senior property economist Kelvin Davidson.

COMMENT: Is a post-election market surge likely?

Tuesday, October 20th 2020

COMMENT: Is a post-election market surge likely?

Will the 2020 post-election period see the usual effect on housing, or will it be another anomaly, asks REINZ chief executive Bindi Norwell.