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How much, on average, does it cost to build a house in 2022? - featured image
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How much, on average, does it cost to build a house in 2022?

How much can you expect to spend when building a house in Australia today?

If you’re dreaming of building a new home, you may be wondering how recent events have affected house construction prices including builder's costs and stamp duty fees.

The answer to this could be summed up with that frustrating yet often accurate phrase: How long is a piece of string?

House Building

There are a number of different factors that can affect the cost of building a house, including but not limited to:

  • The size of the dwelling
  • The location and availability of resources the slope of the land
  • The quality of the fixtures and fittings

With this in mind, there are some “ballpark figures” I can come up with, to give you a guide as to how much it may cost you to build a property.

But before I do, let's look at —

How COVID-19 has impacted costs when building a house

It's worth understanding that when building a new home:

  • 40-45% of costs of the total cost to build is the cost of materials
  • Around 35-40% of the cost is labour
  • There are many taxes and charges, insurance, and overheads
  • And the build would like to make a profit margin of around 15-20%

While it’s hard to be clear exactly how much COVID-19 has impacted costs when building a house, it’s fair to say that with so many changes, border closures, and restrictions it has changed the landscape.

Thanks to volatile exchange rates, supply chains being impacted, and reduced productivity due to COVID-19 restrictions, costs have risen and the time to complete projects has dragged out pushing up the cost of construction.

Now add to that supply chain issues around the world due to the Russian-Ukraine war and things are getting worse.

The shortage of materials and labour is likely to significantly increase housing construction costs over the next couple of years.

Believe it or not, despite all the trees we have in Australia, prior to COVID-19 roughly 20% of Australia's structural timber came from abroad, mostly from Europe.

The boom in residential construction here has coincided with a surge in construction in major overseas markets like the US and Canada, meaning overseas suppliers have been unable to meet this shortfall.

Currently, builders are facing significant supply constraints, labour and material shortages are a significant impediment and inflation is driving up the cost of materials;

  • Timber prices have risen well over 20% over the last few months and this is phenomenal we are seeing around the world.
  • The cost of reinforced steel has increased by over 40% over the last year
  • Plastic piping costs 26% more than a year ago

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The result of all this is that the average home cost $76,000 more to build today than 12 months ago!

Valuers Charter Keck Cramer has considered the Australian Bureau of Statistics (ABS) price indices of residential housing across Australia to understand the change in prices across various materials used in the construction of housing.

Some key takeouts include:

  • Price increases across various items, in several states, are the highest since the introduction of the GST in 2000 (or in some instances since the GFC in 2008/2009). This has led to an overall increase in costs across Australia (across all price groups tracked by the ABS) of +13.6% since the start of COVID-19.
  • The items that have increased the most are timber, board, and joinery (such as structural timber, timber doors, and windows, plywood and board) as well as steel products (such as steel beams and sections and reinforcing steel).
  • It is observed that timber, board, and joinery have increased the most in Adelaide whilst steel products have increased the most in Brisbane.

Average house building costs in Australia

House building costs across all major Australian markets are growing faster than inflation – a trend that looks set to continue for years due to construction demand outstripping supply for both labour and materials.

Disruptions caused by COVID-19 were largely to blame last year with global supply chain issues negatively impacting both material delivery and pricing, while state and international border closures led to intractable labour shortages.

This year the Russia-Ukraine war’s effect on the cost of oil and aluminium, transport blockages, and supply chain shortages are having an impact on further price increases.

House Building Cost

The average cost to build a house per square metre

Quantity surveyors Rider Levett Bucknall (RLB)’s latest report shows the average cost to build a house per square metre of new single and double-storey dwellings throughout Australia for the first quarter of 2022.

Costs in Sydney, predictably, are higher at the top level of $5,900 per square metre and the lowest rate of $1,960.

Melbourne is next highest at $4,000 and $1,860, followed by Brisbane and the Gold Coast.

New homes are typically more affordable to build in Adelaide, Canberra, Darwin, and Perth.

 

Cost to build a house per square metre – single and double-storey dwellings - in each city
Price range – Q1 2022
City Low High
Sydney $1,960 $5,900
Melbourne $1,860 $4,000
Brisbane $1,800 $4,000
Gold Coast $1,400 $4,000
Adelaide $1,580 $3,450
Canberra $1,700 $3,400
Perth $1,400 $2,700
Darwin $1,800 $2,800

Source: Rider Levett Bucknall

The average cost to build a house in each Aussie state

But average building costs per square metre by cities is just one factor to take into account when working out home building costs.

Because the answer to ‘how much does it cost to build a house is more complicated than it might seem.

That’s because the location, size, and cost of the block it’s built on and the finishes all affect how much it costs to build a house.

So the cost of building a house in Melbourne would be vastly different from the cost of building a house in Brisbane, or even the cost of building a house in Adelaide, Perth, or Sydney.

To give a rough idea, in April 2022 the figures from the ABS suggested that, on average, building a home cost around $473,000 (including houses and unit data).

And here is the ABS’ latest breakdown by state:

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Average costs to build a new house by the number of bedrooms

So now we have a vague idea of how much it costs to build a house in Australia depending on the cost per metre square, location, size of the block, and even the fittings.

But what about the size?

It’s all well and good to get a ‘per square metre’ indication of price – but how do you translate that into actual costs, to give you an understanding of how much you’re going to pay to construct your new home or investment property?

There’s no point in going to the bank and saying, “I need to borrow $1190 per square metre”; they’re going to need a little more info to go on than that!

Builders and architects often use a per square metre (m2) figure to cost a project so this is a good baseline to work from, according to a page cost guide.

House Building Cost2

The average cost to build a 3 bedroom house

To build a 3-bedroom house you can expect to pay in the region of:

  • $1300 per square metre for a 3 bedroom weatherboard house on a level block, using budget materials
  • $1600 – $1900 per square metre for a 3 bedroom full brick single level project home, on a level block, using mid-range to high-end materials and finishes

The average cost to build a 4 bedroom house

To build a 4 bedroom house you can expect to pay in the region of:

  • $1,900 per square metre for a 4 bedroom single level, brick veneer home on a level block, using budget materials
  • $2,400 per square metre for a 4 bedroom brick veneer single-level project home on a level block using mid-range finishes
  • $2,900 per square metre for a 4 bedroom full brick two-level home on a level block using top-quality finishes
  • $3,900+ per square metre for an architect designed 4 bedroom full brick, two-level home on a level block using top-quality finishes

The average cost to build a 5 bedroom house or second story

To build a 5 bedroom house you can expect to pay upwards of $4300 per square metre.

If you want to know how much a second-story extension costs, expect to be charged anywhere from $1850 to $3300 per square metre, depending on the quality and price of the construction materials and inclusions.

House Building Cost3

Here's an idea of what has happened to construction costs around Australia

Charter Keck Cramer has provided the following graphics to show the change in what it costs to build a house around Australia.

Cost to build a house in Melbourne

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Cost to build a house in Sydney

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Cost to build a house in Brisbane

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 Cost to build a house in Adelaide

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Cost to build a house in Perth

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So how much can you expect to pay?

First up, the figures I’ve detailed above are just a rough guide, as building costs can vary significantly based on your location, the project design, and the level of the fit-out.

And remember, a builders’ advertised base price is generally only a starting point and does not reflect how much your home will actually cost when it’s 100% completed.

This is because these “starting from” prices usually only include the basics.

If you are looking for a complete price that includes everything from the carpeting through to the landscaping and driveways as well as the white picket fence at the front, then you need to shop around for what’s known as a “turn-key” package – which means all you need to do at the end is turn the key and step inside.

And then there is the added recalculation needed depending on where the property is located, its size, and the quality of finishes.

It’s not as simple as getting one price quote - the cost of building a house varies widely depending on where and what you’re planning to build.

And this is even more so the case in today’s market where the cost of materials is consistently and steadily increasing, almost by the day.

Thanks to Australia’s rising inflation, almost every category of building materials have become more expensive.

For example, prices of steel products have surged 42.1 per cent in the year ending March 2022, according to ABS figures.

And that doesn't take into account the level of inflation and subsequent price increases which have occurred since March up until today.

And then the cost of an architecturally designed home to one built by a volume builder would differ again.

But to give a very rough idea, in April 2022 the figures from the ABS suggested that, on average, building a home cost around $473,000 (including houses and unit data).

Hidden Costs

The hidden costs of building a house

As mentioned earlier, there are a number of costs that come into play when building a house.

For a standard brick home without any custom finishes, you may be able to come up with a fairly clear budget.

However, once you start factoring in extras such as landscaping, driveways, retaining walls, fences, upgrades, finishes, and fittings, your costs can increase significantly.

We already know that the breakdown of the costs to build a house would differ depending on the size of the property, location, and finishes, but what about the hidden costs of building a house?

Here are a few costs you might have overlooked.

  1. Site costs

These are the expenses that are incurred to prepare your block of land before construction can even commence.

These are usually completed by your builder and in most cases, the site costs are charged on top of the build price.

Some of the typical expenses involved in a site cost can be:

  • Connections to services such as water, sewer, electricity, and gas
  • Fences
  • Retaining walls
  • Site clearance (trees, roots, bushes)
  • Site survey
  • Soil tests

According to the Urban Development Institute of Australia's (UDIA) 2022 State of the Land report, a surge in demand for new land underpinned a 6.0% increase in the national median lot price to $322,379 between June and December 2021 across the major capitals.

House Price

The most expensive greenfield market, Sydney, recorded a 14% increase in median pricing in 2021 with a year-end lot price of $543,750.

This median lot pricing increase was largely driven by a spike in September quarter pricing to $585,000 a lot.

After a two-year decline, Melbourne recorded an annual increase in median lot pricing, rising by 14%, to finish the year at $327,475.

Southeast Queensland recorded a 5% annual price uplift to $272,375.

At this median price-point level SEQ continues to hold an affordability advantage over the other two major east coast housing markets, being 50% cheaper than Sydney and 17% cheaper than Melbourne.

Perth’s median lot pricing grew a modest 1% to $215,2000 (which is the first price increase after six years) and the ACT also saw median pricing rise by 9% to $453,000.

Adelaide recorded a 2% annual price increase in 2020 to $187,250 and remains Australia’s most affordable market by some margin.

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The increase in lot prices coupled with the minimal rise in lot sizing has delivered further slight increases in the price of land on a per square metre basis across most markets, the UDIA report also noted.

Sydney's land price recorded the most substantive growth with a 17% increase to $1,504 per sqm.

Melbourne’s land price also increased 8% in 2021 to $883 per sqm.

​​Southeast QLD recorded a 9% growth in land pricing to $679 per sqm.

ACT recorded an 11% rise in land price to $922 per sqm.

Perth's land price increased by a modest 1% to $574 per sqm.

Adelaide recorded modest growth in the metropolitan land rate with an uplift at $416 per sqm.

  1. Other factors that can affect the build price

Once you have signed a contract with a builder and decided on the layout and design of your property, they will make plans and prepare documents, before arranging a ‘pre-start meeting’.

The pre-start meeting is at the stage at which your house plans are finalised.

They are approved by the council and you are ready to make your final choices in regards to all of the design aspects, such as wall colours, the types of light fittings, and the materials used on the roof and on floors.

The ‘prime costs’ are generally already in place by the builder, however, keep in mind that in base contract packages, the prices factored in often account for the cheapest materials, the most basic fittings, and the most standard fixtures.

House Price2

If you wish to change any of these, you could incur an extra cost.

Some of the parts of the home that you may wish to ‘upgrade’ during this process include:

  • Roof: Depending on the materials you choose for your roofs, such as tiles or colorbond, this can vary widely
  • Tiling: An allowance for a tiling amount per sqm will be made, but this can change depending on the quality and size of your final choice.
  • Fixtures and fittings: Fancy, nonstandard taps, and European appliances will obviously cost more than standard Australian-made fixtures and fittings. Additionally, labour costs may increase if you select items that are more complicated to install. Inclusions such as fully ducted air conditioning can cost up to $10,000 (more for a two-storey home).
  • Kitchen: If you’ve ever shopped for a kitchen benchtop, you know how widely the costs of a kitchen upgrade can vary. Again, the final price will depend on the quality of the item you choose and what is in your initial specification in the contract.
  • Electrical: If you decide to change your lighting layout from what has been initially drawn, this can add costs. For example, if the specifications in your contract allow for one standard light per room but you wish to have multiple downlights, this extra cost can add up.
  1. Extra costs you should allow for

Some extra costs you need to take into account and which could end up costing you a significant amount of money include:

  • Soil quality: One of the first things your engineers will organise is a soil test. They do this by drilling some boreholes and the best classification you can get is M classification soil. If your soil is more difficult to work with eg. Clay, Sand or Rock then you’re likely to have to pay extra.
  • Slope of the block: The easiest site to build on is a flat block. If your block slopes you’re likely to have to pay extra for more foundations or to cut and fill the site (make it flat) and possibly for retaining walls.
  • Flood-prone areas: some sites require the house to be raised with the floor level above natural ground level to cope with excessive rain or floods and this can add to the construction cost.

Government Stimulus

Government building stimulus packages and what they’ve done to build costs

Government building stimulus packages, such as Homebuilder and other state-based programs, have provided extensive support to the housing sector, particularly for detached housing as opposed to apartments.

For the year to July 2021, 143,000 private detached houses were approved, the highest number of approvals over a 12-month period since 1984.

In fact, approvals for all new dwellings increased more than 25% in 2020-21.

And approvals for new houses rose more than 40%.

And while that is great news for people wanting to build or renovate their homes, the surge in demand has been near-devastating for the construction industry.

Since applications for HomeBuilder closed at midnight, Wednesday 14 April 2021, the number of dwelling approvals has nosedived.

ABS data shows that in May this year there were 15,487 approvals, a 1.5% drop month-on-month but, significantly, a 23.4% drop year-on-year.

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The drop in approvals was expected once the government stimulus (or over stimulus as some call it) ended, but perhaps what wasn’t quite as anticipated was the level of demand.

And it's this demand surge that has put pressure on the supply of key construction materials, labour, and equipment.

The pandemic outbreak around the world led to the closures of factories and ports, limiting production and delaying transportation.

Obviously, these supply chain constraints have heightened the demand for available stock and inflated prices.

And the government stimulus only exacerbated this supply bottleneck.

This is evident with the ABS's producer price index showing that input costs for housing construction have increased by 15% over the past year.

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Soaring prices are particularly concerning for builders locked into fixed-price home contracts.

Even with the lower number of approvals, demands on builders will remain great.

And as a result, we have seen at least 17 building construction companies go bankrupt across the country.

Melbourne-based building firm Langford Jones Homes was placed into voluntary liquidation just earlier this month.

And several other major residential construction companies have gone into liquidation too, including Probuild, Condev, ABG Group, and Privium, alongside several smaller players like Hotondo Homes Hobart, Home Innovation Builders, and Next.

Construction giant Metricon is also reportedly on the verge of collapse following the sudden death of founder and CEO Mario Biasin in June.

And a recent Equifax report shows that the significant increase in construction company failures since the start of the year shows no sign of abating.

Provisional data indicate that construction insolvencies increased 19% for the month of May, sitting 43% higher than last year (May 2021), attributed to the mounting pressures of disrupted supply chains, rising material costs, and labour constraints, inclement weather, and project delays.

Learning the lingo

When you go through the process of building a home, you’ll come across plenty of industry jargon that can be tricky to understand – and even trickier to price.

Here are a couple of terms that may be included in your building contract, which are important to understand:

Provisional sums

A provisional sum is an estimated amount of money that is determined by the builder, according to how much they believe the relevant job or material will cost.

Often the builder can’t put a fixed cost on certain parts of the job at the time of providing a quote or signing the building contract because of unknowns.

For example, while your site may look flat and the builder quotes as such when starting the works, they may discover large clumps of rock that need to be removed and levelled prior to the slab being laid.

Or when the builder starts digging your foundations they realise they have to dig down further to hit firm footings, which will eventually require more concrete to be poured.

At times like this, you’ll need to pay an additional sum on top of the initial contract price, as the allowance that had been provided has been exceeded.

pencil icon

Note: It is always a good idea to budget for around 10% of the total build price to allow for fluctuations in provisional sum prices.

Prime Cost

Prime costs

A prime cost is an item that is subject to change during the construction of your home.

These include things like fixtures and fittings such as tiles, doors, and taps, as these items may change depending on your final choice.

You’ll find an estimated amount is provided when signing the building contract and then depending on your specification of the finishes during the build, these prime cost items may cost more or less if you elect to change them along the way.

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Note: These items generally only change due to your change in preferences, so this could be an opportunity to trim costs if you opt for basic or standard fixtures, fittings, and finishes.

How long does it take to build a home in 2022?

It’s not just prices that have shot up since the COVID-19 pandemic began, the time to complete construction has also blown out.

A renovation that would have previously taken 4 months is now taking 6-8 months, and a new build that would have been 6-8 months is taking 12-18 months.

That’s really putting additional pressures on both builders who need the cash flow and the consumers who might be paying rent on one home while the building takes place for another, or who have two mortgages.

Unfortunately, a number of building companies have folded, having signed fixed-price contracts earlier in the pandemic and not being able to complete their contracts.

The problem is that when it comes to the question of ‘how long', there are just too many variables.

And currently, there are ongoing construction delays associated with COVID-19, only adding to the time taken to build a house.

Then, there are the unforeseen hurdles that always seem to arise when building - things like unfavourable soil conditions such as rock removal, bad weather (of which there has been a lot this year, particularly in NSW and QLD), or waiting for certain permits or approvals.

Having said all of that, the average time to build a two-storey house is currently roughly 10 -12 months.

House Building Cost6

In conclusion

While the cost of building a home has clearly increased, the price of purchasing an established home in Australia has also skyrocketed.

And there may be more price hikes to come yet.

The average cost of building a house varies due to a range of factors, including size, location, and quality of fixtures and fittings.

While I’ve tried to give you estimates, the final price will depend on whether you chose a display home that the builder has designed with cost efficiency in mind, or a unique home- your own special castle which has never been built before.

About Bryce is a property development specialist, having successfully sourced, project managed and completed hundreds of development projects for Metropole’s clients, helping them create substantial wealth.Visit Metropole.com.au
28 comments

Justin - that has not worked its way into retail prices here

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Hey Bryce, just looking at the global Lumber and Iron ore prices I am just wondering if we are going to see some relief in prices? In the last 4 months lumber has gone from $1450 USD/1000 board feet down to $659 and the iron ore price has halved in ...Read full version

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Are you a registered builder?

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