Estimating construction costs on residential houses to projects: Michael Matusik

Do you know what the two most commonly searched themes are on the Matusik Missive site?  

The most frequent is ‘property clock’ and the second, and not that far behind the clock, is ‘construction costs’.  

We have had over 200,000 visits to the new Missive site over the past nine months, with just over 1,300 people using the search button.  

So this week let’s cover construction costs.  

Before we start, we have approached several major construction firms, advisory bodies and the MBA themselves – about covering this topic as a Missive special guest.  

For whatever reason those we contacted either declined or didn’t reply.  So we have had to do this solo.  But given the interest in this topic – and it seems from many who are looking to do a renovation, either for themselves or as an investment – we thought we should give it a stab.  

But be forewarned – we are not builders.  

We have also used extensively the material available for free from RLB or Rider Levett Bucknall and in particular their Riders Digest Australia, Queensland Edition.  You can download this yourself, plus similar for most other Australian capital cities here.  

Do you get out Thirsty Thursday?  It is a fun filled read – with just six hyperlinks – designed to help sort out your reading pile.  And it does come out each Thursday.  Go here to subscribe.  Album and book reviews are included too!

Total building costs

These figures are based on a rate per net lettable area and include building works and services.  They exclude a range of things including land, professional and legal fees, car parking and the GST.  I have chosen the high end of the cost range.  The house, walk-up and townhouse figures relate to mid-quality product without air-conditioning.  The high rise apartment stock is ‘luxury’ quality with fully ducted air-con.  

Prices are at the March quarter 2013.  

Some of you might want to hit the snooze button about now, as the following is going to be somewhat loaded with stats.  It is the nature of the terrain.  

Houses

A new house costs about $2,300/m² to build in Canberra and Perth.  Costs are higher in Darwin and Melbourne, averaging around $2,600/m².  In Brisbane, they cost about $3,200/m² and close to $3,850/m² in both Sydney and Adelaide.  Why Brisbane and Adelaide are so high is a question worth asking and  I don’t know the answer.  Maybe someone with more smarts than I – so a lot of you – might know why.  

Townhouses

They are cheapest to build in Darwin ($2,300/m²) – again who knows why and the most expensive to erect in Adelaide ($3,200/m²).  The other major capitals all average about the same total building rate at about $2,600/m².  

Walk-up apartments

Darwin is the cheapest location to build new apartments under three storeys in height.  The average Darwin build cost is $2,300/m².  Perth’s costs average $2,800/m².  Brisbane’s, Melbourne’s and Canberra’s come in at around the $3,000/m² mark.  Again, Adelaide and Sydney are the most expensive, averaging $3,200/m².  

High rise apartments

For those buildings less than 20 storeys, the average total building cost is $2,300/m² in Darwin; $2,700/m² in Brisbane; $2,800/m² in Canberra and Melbourne; $2,900/m² in Perth and Sydney and again the highest in Adelaide at $3,600/m².  

For taller apartment structures, the average build cost leaps to $3,500/m² in Brisbane; $4,000/m² in Sydney and Melbourne and over $4,400/m² in Perth.  

Locational spread

Despite the results outlined, Brisbane is the cheapest capital to build something new in Australia.  This statement reflects total building costs across both new residential and other structures such as offices etc.  

Also, if we use Brisbane as the cost base, then building costs are 14% more expensive in Adelaide; 16% more in Canberra; 17% more in Melbourne; 20% more in Sydney; 24% more in Perth and 25% more in Darwin. 

I don’t understand why these figures differ so much when compared to the $/m² results outlined above.  But again, we are just messengers here.  

Queensland differentials

Again, using Brisbane as the cost base, building something new on the Gold and Sunshine Coasts is 5% cheaper than in Brisbane.  It costs 5% more in Cairns; 8% more in Townsville; 14% more in Mackay and 25% more in Gladstone.  

Site works/demolitions

When it comes to cleaning up a house for a major refurbishment and/or removing it entirely, RLB suggest that for a single storey timber house, the renovator should budget between $45/m² and $65/m².  For single and double storey brick homes, this budget range needs to increase by about $10/m².  

Michael Matusik is the founder of Matusik Property Insights, which has helped over 550 new residential projects come to fruition.  Read Michael’s Blog or follow him on Facebook and Twitter or connect via LinkedIn.