How much does it cost to build a house in 2022?

It’s a seemingly simple question with a complicated answer: how much does it cost to build a house in Australia?

While the latest Australian Bureau of Statistics data reveals that on paper the average house costs just over $320,000, the “real world” figure depends on a number of factors.

From where the house is located, to the size and cost of the block its built on, to the finishes selected and even the impact of COVID, there’s lots to consider. Let’s break it down.

Building costs include factors such as location, size, finishes and design.

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How global supply chain issues are affecting construction in Australia

COVID-19 has changed the landscape for the building profession in a variety of ways, from supply chain and productivity issues to border restrictions, so project completions have been slower and more expensive on average during the pandemic.

Worker shortages are causing even further delays on projects amid the renovation 'boom' caused by Australians spending more time at home due to the global pandemic.

There are a number of issues that have arisen in the post-COVID landscape that builders are now facing.

While government grants for both businesses and consumers were a lifeline at the time and ensured many builders were able to continue operating in 2020-21, these have largely finished up.

Here are a few of the issues builders are facing now:

1. Rising cost of materials

Rising supply chain costs are having the biggest effect on the building industry in the post-COVID landscape.

Most client contracts are signed well ahead of work starting, with costs locked in at that market price. This means that a year down the track when work actually commences builders are having to absorb these prices without passing them on to the client.

One regional builder told realestate.com.au that the cost of materials had risen between 15% and 45%, with some suppliers raising their costs three or four times within a few months for the same item.

Furthermore, some items (such as specific kinds of timber), that are specified in building contracts when signed simply aren't available now.

In other cases builders are faced with higher costs for the same materials. From the client's perspective the item may be available but it's the builder that will have to pay new higher fee, even if the price is 10 times higher than it was when the contract was signed.

"Margins are becoming so thin," the business owner said. "Contracts don't allow any movement for passing costs onto client so we're relying on being able to increase the margin on the next job, simply to survive".

"All it can take is for one client to be late on a payment and it can spell the end of the business"

"Some builders are giving back contracts and walking away from jobs, potentially being taken to court, rather thank risk losing everything."

The business owner said more builders are being forced to change their legal strategy when it comes to taking on new work.

A contract type called Cost Plus, where the client can be billed for hours and labour with the builder charging for materials at the end of the job - rather than the beginning, means they don't run the risk of losing money.

This type of contract is much more complicated with administration, however, as it requires a detailed monthly report to be submitted to the client as the job progresses.

2. Delays in materials arriving

Delays in freight shipping also cost the builder money as they're forced to push out build timeframes, spending more time on one job before they're able to move onto the next. They also need to pay employees regardless of whether work can be completed.

Penalty rates in contracts cannot legally be charged unless formal notices, called Extension Of Time notices, are served to the client regularly - which requires a lot more administrative labour.

Sometimes these are items that normally would be able to be picked up at a local hardware store, other times they're specific elements of larger products, such as the foam between double-glazed windows.

Even a small component, if missing, can delay the entire project.

The cost of the land

The first thing to consider when calculating how much it costs to build a house in Australia is the price of the land for the house to sit on, which varies hugely from state to state.

According to The Urban Development Institute of Australia’s 2021 State of the Land report, in 2020, Sydney’s median lot price was $495,000, Melbourne’s was $319,000 and Adelaide’s $183,460.

The average cost of land in Sydney was $1285 per sqm, Melbourne $819 per sqm and Adelaide $400 per sqm.

Average cost of building a home

The cost of building is influenced by many factors, but the ABS data puts the average is $1393.55 per sqm.

However, this figure doesn’t include design, planning permits, any site works or any cost blow-outs.

According to ABS Buildings Approvals data, the average dwelling in Australia spans 229.8sqm, which puts the cost for the build portion at $320,238.

There are many factors that make up the price of a home build. Picture: realestate.com.au/buy

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Wolf Architects director Taras Wolf, on the other hand, said the cost of building an architecturally designed house starts at a minimum $3000 per sqm, right up to $5382 per sqm or $50,000 per Australian house square (9.29sqm).

Mr Wolf said it is difficult, if not impossible, to compare the cost of an architecturally-designed home to one built by a “volume builder for as little as $1600 per sqm.”

“The higher price of architecturally-designed homes is due to the nature of each one being essentially a one-off prototype, because no two clients, site or requirements are ever truly the same. It’s not necessarily related to materials of quality, it has more to do with time,” he said.

While he declined to put an average price on building with a large builder because of the many variables, Hotondo Homes’ general manager of building and operations Nicholas Erbacher said his company’s designs are “architecturally-inspired to deliver a stunning home at a lower cost.”

The company offers more than 90 flexible floor plans, which clients can adjust.

“As a national franchise network, Hotondo Homes’ builders encourage clients to select a design from one of three ranges,” Mr Erbacher said.

Supplier partnerships with brands like Beaumont Tiles, Haymes and Colorbond help achieve this “reasonable pricing.”

Average cost of building a home, state-by-state

Factors affecting building costs

The cost to build a home is influenced by five key factors:

• size
• quality
• site considerations
• desired timeframe
• complexity

Mr Wolf said a larger house with more bedrooms naturally requires more materials, more labour and occasionally more specialised equipment.

“When it comes to build quality, higher-quality materials demand better finishing and craftsmanship, which costs money. The terrain and condition of the land being built on also has a big impact and an architect is best placed to maximise a lot and floor space,” he said.

The quality of finishes will affect the final cost of a home build. Picture: realestate.com.au/buy

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Mr Erbacher said site costs are an important consideration.

“While many factors can be managed by the client, it is the site costs where control is limited due to a number of site-specific requirements,” he said.

“If you’re in a situation where you need to reduce costs, compromising on the quality of your foundations is not the area, you can always upgrade your doors in the years to come, but you can’t upgrade your concrete slab,” Mr Erbacher said.

“The location of your home can also impact the cost due to council requirements and planning overlays.”

Timeframes also affect what resources are required for a build, Mr Wolf said.

“Architects design to make the absolute most of space, to make it inspiring, so that can mean more complex structures, which can increase the cost too,” Mr Wolf said.

Budget blow-outs are not unheard of either and can generally be attributed to changes made to original plans.

Mr Erbacher said all Hotondo homes include a list of standard inclusions, “however you may choose to upgrade the existing inclusions. If you do, your costs may begin to rise.”

The price of building often doesn’t include optional extras like landscaping, fencing, swimming pools and local council costs, which can also add tens of thousands of dollars.

COVID-19 construction and renovation subsidies

In the 2020/21 financial year, the federal and state governments provided subsidies to help home buyers and to encourage people to build and buy amid the COVID-19 pandemic but they've largely finished up.

HomeBuilder grant

The Australian Government’s HomeBuilder Grant for new builds and significant renovations came to a close on April 14, 2021.

But if you’re one of the 121,363 people who applied for a grant, the government has extended the construction state date from six months after contracts were signed to 18 months.