Project Budget vs Construction Budget
Have you ever tried cooking a recipe only to realise half way through that you’re missing a key ingredient? You have to go the shops half way through making it or making sub-par substitutions. It’s stressful and takes twice the time you thought it would.
In this article we’re here to help avoid that happening to your upcoming building project.
A common mistake made when considering construction budgets is thinking that the Contract Amount with a builder will be the same as the Total Project Cost.
This can lead to some serious buyer’s remorse if you don’t know what to expect upfront. Here is a quick example to show just how different those two figures can be.
Did you know?
New Single Storey 3 Bedroom House Example
240sqm at $2,500/sqm Construction Cost – this is a very generic rate and may not apply to your project
$60,000 Site Works and Landscaping (10%) – some landscaping may be optional if you want to do it yourself later but the majority of this amount covers trenching for services, clearing the site and digging footings
$60,000 Special Factors (10%) – known factors during design that are specific to your site (e.g. sloping block, rocky soil, asbestos removal from an old building
$60,000 Design Contingency (10%) – to cover a little scope creep for things you forgot you needed or a higher standard of finishes than you may have originally planned for
$780,000 Net Construction Cost / Contract Amount
$78,000 Construction Contingency (10%) – for unexpected things on site like rock in the ground
$39,000 Escalation (5% or more) – allowance for cost increases over time
$897,000 Total Construction Cost
$134,550 Professional Fee Allowance (15%) – this rate is generic but would in theory cover the fees of a basic project team of quantity surveyor, land surveyor, geotechnical engineer, structural engineer, civil engineer, ESD consultant, and architect.
$10,000 Town Planning & Authority Fee Allowance – for the fees you’ll need to pay to council
240sqm at $200/sqm Furniture & Equipment Allowance – optional but worth considering early
$1,089,550 Total Project Cost
Project Budget
Does this mean that every 3-bedroom home will cost $1m to build? Absolutely not! Your home will be unique and so will its budget. This example is just a guide to the kinds of costs that are taken into consideration during your project.
You can see in this graph that the actual Construction Contract (or Tender Price) may only include around 70-75% of the Total Project Cost.
I have a quote from a builder. They don’t mention these other costs.
When dealing directly with a builder they may include the fees in their price. They won’t allow for your contingency amounts though - because these are unknowns.
Anecdotally there are many accounts of large building companies advertising quotes for homes for relatively low amounts (say, $250,000) but between customisation requests from the clients and “extras” or contract variations on site the customer ends up paying up to an additional $100,000.
Don’t settle for a Frankenstein’s monster of a plan spliced together from standard and non-standard designs. By using a registered Architect and licensed Quantity Surveyor you can get the home of your dreams while also knowing where you stand financially upfront before you get locked into using any particular builder.
The Rawlinsons Construction Handbook is released every year as a key reference for Quantity Surveyors when estimating costs. The 2020 Handbook recommends for Melbourne:
Medium standard finish, single storey, brick veneer house $1620-1750
High standard finish, single storey, brick veneer house $2280-2460
As you can see above, these sqm rates do not include everything and are just a guide. The information given here is general and should not be used for your project without the professional advice of a registered quantity surveyor (which I am not).
Did you know?
“For the median Melbourne house price of $1,200,000, after 10 years the homeowner that employed an architect is $256,000 better off than the homeowner that didn’t.”
That’s according to the latest research by carried out by the University of Melbourne and ArchiTeam, which also states that “for every $1 spent on architectural fees, the homeowner gains $11.40.”
Ready to get started? Have a question that’s not covered here? Let’s chat about your project in more detail, make a customised plan, and go through exactly what to expect next. You can request a meeting through the website, Facebook or call me on 0410 151 790.
I can't wait to meet you!
