Hidden Costs When Building a House: What to Watch Out For

Building a house can be an exciting journey, but there are many hidden costs to consider alongside the more obvious expenses. Unanticipated costs can have an impact on budgets and timelines, making it crucial for prospective homeowners to be aware of them before embarking on the construction process. By understanding these hidden expenses, you can better prepare yourself and avoid unexpected surprises during the building process.

One of the major hidden costs when building a house is site-related expenses, such as soil test and contour survey, which are required before the building process can commence. Other areas to budget for include landscaping, driveways, and unexpected modifications or variations in the design plan. Beyond these physical elements, homeowners may also face various fees such as council fees, building levy and services authority contribution fees.

Navigating the complexities of the building process can be daunting; however, staying informed and anticipating hidden costs will enable a smooth construction experience. By incorporating these considerations into the initial planning phase, you can ensure that your dream home is built on a solid foundation – both financially and structurally.

Land and Site Costs

Site Preparation

Site preparation is crucial when building a house. The cost of preparing the land for building can range from a few thousand dollars, averaging around $1,500 – $3,000. This comprises clearing the land, levelling it, and ensuring that it is suitable for construction.

Soil Test

Before your final engineering design for the footing structure, you  will first need to conduct a soil test to determine the soil’s quality and determine the founding depth of the foundation suitable for construction. The cost of a soil test may vary based on the location and specific requirements of the project. If the site had existing structures, then you might require a 2 staged survey, one prior to demolition for initial design and one post demolition to confirm the stability of the surrounding and test the soil under the hidden structures. 

Site Survey

Another critical consideration is the site contour survey or site feature and level survey, which measures the slope and topography of the land to help create plans for drainage, grading, and construction. The contour test cost will depend on factors such as the size of the land, the complexity of the test, and the terrain involved. The site survey is generally this first thing the architect requires to accurately locate the site features and design to suit.

Land Registration

Either you are purchasing an undeveloped piece of land or subdividing an existing lot. As part of the process, you will need to register your land with the local authority. The cost of land registration varies depending on the property’s size and location, be mindful of other hidden costs associated with subdivision, such as developmental contribution fees, services connection fees, waste management fees, new cross over fees, title re-establishment fees and legal fees… etc.

Site Costs

Site costs are the expenses that arise due to the specific requirements of the construction site. These can include:

• Temporary site requirements
• Road closure fees
• Bin hire / waste management fees
• Temporary power
• Temporary water
• Tree protection
• Hoarding / Site fencing

These hidden costs can range from $10,000 to $70,000, with an average of $18,000. However, the total sum depends on the land’s quality, location, and specific building requirements.

Council Fees and Permits

When building a house in Australia, it’s essential to be aware of the various council fees and permits that may be required. These costs can include planning permits, road closure fees, and development contribution fees, which are necessary for proper budget management. Below, we will discuss each of these sub-sections in detail.

Planning Permit

A planning permit is often required for new construction or significant renovations. The process involves submitting your building plans to the local council, who will assess them against local planning regulations and any applicable overlays. Prices for planning permits can vary depending on the complexity of the project and the specific council. Some councils may charge a flat fee, while others may calculate fees based on percentages of the overall development cost.

Road Closure Fees

During the construction process, there may be circumstances where temporary road closures are needed to enable safe and efficient delivery of materials or equipment. Road closure fees, ranging from $120 to $2,000, can occur depending on the notice given, length of time, type of road, and the local council’s requirements. It is essential to factor in road closure fees when estimating your overall project cost.

Drainage Permit (Legal Points of discharge & On site storm water detention permit)

Acquiring a Drainage Permit is a crucial aspect of constructing a residential building, encompassing the Legal Points of Discharge (LPOD) and an On-site Stormwater Detention Permit (OSD). 

This permit is essential to ensure proper handling and regulated discharge of stormwater from the property, in accordance with local council requirements. Non-compliance with these permits may result in legal repercussions and additional costs. 

Moreover, mindful stormwater management is crucial in averting floods, erosion, and environmental damage. 

Although the estimated cost of obtaining a drainage permit may vary depending on the property’s size and specific requirements, it is typically in the range of $300 to $1000. Factoring in this cost is a vital part of the planning and budgeting process during the construction of a house.

Asset Protection & Dilapidation Survey

If you are building close or within 200mm to any existing structures or council asset that does not belong to you, it is recommended that you obtain a dilapidation survey prior to any works taking place to record the existing state of the surrounding site to avoid any future dispute regarding damage to other party’s assets. If there are works over the council asset such as driving over the public footpath, the council may require you to pay an asset protection bond, ranging from $2,000 to $5,000 and return to you at completion of the works.

Overall, hidden costs such as council fees and permits should be considered and factored into your budget when building a home. By understanding these fees and obtaining the necessary permits, you can ensure a smoother construction process and avoid potential delays or penalties.

Hidden Costs Related to Building Materials and Labour

Material Costs

In recent years, the cost of building materials has risen significantly, with some estimates reporting a 20% increase within a year. For instance, an average project home worth $400,000 might have increased by at least $100,000 due to the rise in material costs¹.

Different building materials can also substantially impact the overall cost. For example, brick houses are usually around $2,400 per square metre to build, while timber houses cost approximately $1,680 per square metre.

Labour

Aside from material costs, labour is another factor that can cause unexpected expenses when building a house. Various elements can influence labour costs, such as delays or modifications requested by the buyer. Delays may occur due to late payments for stage payments or changes to the construction plan.

Additional labour-related expenses might arise from alterations made during the construction process, such as changing grout colour or adding extra electrical points. These adjustments can quickly become expensive, as they may entail additional legal fees, penalty clauses, engineering, drafting, and approval costs⁴.

In conclusion, it is essential to bear in mind the potential hidden costs associated with building materials and labour when constructing a house. By understanding these costs, prospective homeowners can better plan and budget their building projects.

Extra Costs for Design and Customisation

Modifications

Any alterations made after signing the building contract can result in substantial charges. These may include:

• Extra labour and material costs
• Engineering and drafting fees
• Approval fees
• Legal and penalty clauses for modifying the contract

To avoid these additional expenses, it is crucial to finalise the design and customisation of the house before signing the contract.

New Home Design

Selecting the perfect design for your new home is an exciting process, but it’s important to be aware of potential hidden costs associated with the design. Different designs may require varying amounts of resources, leading to different building costs. Factors that can impact the overall cost of the design include:

• Location of the property
• Materials used
• Complexity of the design
• Specific sustainable practices needed to meet regulations such as BASIX (optional)

It is essential to research and plan carefully before committing to a particular design, as changes later in the process could prove costly.

Drafting

Drafting plays a vital role in the construction of a new home, ensuring that the design is accurately translated into blueprints. Drafting services can come with additional costs. These may include:

• Site surveys
• Development applications and approvals
• Mapping services

When selecting a drafting service, it’s essential to obtain detailed quotes and consider any potential hidden costs.

By being mindful of these extra costs when factoring in design and customisation, you can better prepare your budget and ensure a smoother building process.

Safety and Environmental Considerations

BASIX

BASIX (Building Sustainability Index) is a compulsory measure in Australia designed to improve the environmental performance and reduce water and energy consumption in new residential buildings. When building a house, it is crucial to comply with BASIX requirements, which may add extra costs to your project. BASIX costs include obtaining a certificate and implementing energy-efficient features, such as insulation, water-saving devices, and efficient heating and cooling systems.

BAL

Bushfire Attack Level (BAL) assessments are essential in areas prone to bushfires. The BAL is a risk level assigned to a building site based on factors such as vegetation, slope, and distance to buildings. The cost of a BAL assessment depends on the site’s risk level and building requirements to ensure the house can withstand potential bushfire conditions. These requirements may include using fire-resistant materials, installing ember screens, and designing specific fire prevention features.

Flood

Building in a flood-prone area requires careful consideration of flood risk and adherence to local council regulations. Flood-related costs may include:

• Obtaining flood reports and engineering assessments
• Additional engineering requirements due to the flood risk, such as raising the building or installing flood-resistant materials
• Higher insurance premiums due to increased flood risk

Bushfires

Bushfires are a significant concern in Australia, and building in bushfire-prone areas requires specific measures to ensure safety. These measures include:

• Compliance with Australian Standard AS 3959 (Construction of Buildings in Bushfire-Prone Areas)
• BAL assessments and compliance with building requirements
• Installing fire-resistant materials, sprinkler systems, and bushfire protection features

Trees

In some cases, trees on a building site must be taken into consideration for safety and environmental reasons. The costs associated with trees include:

• Obtaining arborist reports and complying with local council tree protection regulations
• Removing or pruning trees, if permitted
• Addressing potential root damage or structural issues caused by tree roots

Additional Home Features

Driveways

Driveways are an essential aspect of a home, providing access to the garage and off-street parking. When building a house, it’s important to consider the type and design of the driveway, which can impact costs:

• Material: Choices range from concrete, asphalt, or brick, and each comes with a varied price range.
• Size: The length and width of the driveway will affect the overall cost.
• Drainage: Proper drainage must be installed to prevent water pooling and damage to both the driveway and garage.

Flooring

Flooring choices vary depending on personal preferences and budget constraints. The type of flooring can impact the cost, as well as the installation process. Options include:

• Hardwood: A popular choice, hardwood flooring can be expensive, but it adds value to the home and gives a classic look.
• Laminate: A more affordable option, laminate mimics the appearance of hardwood or stone at a lower cost.
• Carpet: Offering warmth and comfort, carpet is available in various styles and price points.
• Tiles: Ideal for wet areas such as bathrooms and laundry rooms, tiles cost can vary based on material and quality.

Landscaping

Landscaping enhances the appearance and usability of outdoor spaces, but it can come with hidden expenses:

• Design: Hiring a landscape designer will incur additional costs based on their expertise and the complexity of the design.
• Hardscape: Features like retaining walls, patios, and walkways can add to expenses, depending on material choices.
• Plants: The selection and quantity of plants, as well as any required soil amendments, can impact costs.
• Irrigation: Installing a watering system will require additional investment, including water usage costs.
• Fencing: Providing privacy and security, fencing costs vary based on materials, installation, and the size of the area enclosed.

Additional home features such as appliances, lighting, and water systems should also be taken into account when budgeting for building a house. High-quality and energy-efficient options may have higher upfront costs, but they can save money in the long run and add value to the property.

Finishing Touches and Interior Costs

Finishes

The costs of finishes can add significantly to the overall project. This includes paint, wallpaper, and other wall finishes. The choice of materials and quality will directly impact the cost. On average, the cost for finishing a standard-sized room can range from:

• Painting: $200 – $800 per room
• Wallpaper: $300 – $1,200 per room

Prime Costs

Prime costs (PC) refer to the allowance for fixtures and fittings, such as taps, basins, and other items within the house. The builder provides an estimate for these costs, and they may vary based on the homeowner’s preferences. A PC sum of around $8,000 – $12,000 is typical for a standard house.

Floorboards

The choice of floorboards can greatly impact the cost of building a house. Different types of materials have distinct price points:

• Engineered timber: $60 – $120 per square metre
• Solid timber: $70 – $190 per square metre
• Laminate: $20 – $50 per square metre

Tiles

Another popular flooring choice in many Australian homes is tiles. They are also often used for walls in bathrooms and kitchens. Tile prices can vary depending on the material and quality:

• Ceramic: $20 – $100 per square metre
• Porcelain: $50 – $150 per square metre
• Natural stone: $80 – $200 per square metre

Carpet

Carpet is often used in bedrooms and living areas for added comfort. The cost of carpet installation depends on the material and quality:

• Synthetic: $25 – $50 per square metre
• Wool blend: $40 – $120 per square metre

Appliances

Lastly, consider the costs of essential appliances in the home. This includes items such as ovens, cooktops, refrigerators, and washing machines. These costs can add several thousand pounds to the overall cost to build a house, with average costs as follows:

• Oven: $500 – $3,000
• Cooktop: $300 – $2,000
• Refrigerator: $800 – $4,000
• Washing Machine: $400 – $1,500

Keep in mind that electricity and gas connections may also contribute to the overall cost of building a house. These variables must be considered when creating a budget for the project, as they can significantly impact the final price.

Potential Delays and Penalty Clauses

Construction Delays

Construction delays can occur during the building process for various reasons, such as inclement weather, public holidays, unforeseeable factors, and the nature of the work itself. By law, builders must make a reasonable allowance for delays due to these factors, considering the seasons and taking into account rostered days off and weekends.

Common Causes of Delays:

• Weather conditions
• Public holidays
• Rostered days off
• Weekends
• Time needed for specific tasks, such as letting a slab cure

To minimise the impact of delays, some builders include contingency or ‘float’ in their time estimations. This allows for potential delays, keeping the project within acceptable boundaries of profitability.

Penalty Clauses

In the case of modifications or variations to the construction plan after signing the building contract, homeowners might face penalty clauses for altering the agreement. These clauses can result in significant charges, which may include:

• Additional labour costs
• Extra material expenses
• Engineering fees
• Drafting fees
• Approval fees
• Legal costs

In addition, a building contractor may face fines if they do not comply with the provisions for an extension of time. For example, if a contractor fails to give the owner a signed copy of the claim for an extension of time within five days of approval, they may be fined.

Financial Penalties:

• Daily rate on prolongation cost or liquidated damages associated with extension of time 
• Costs related to contract modifications (labour, materials, approval fees, etc.)

Builders often try to minimise their risk when dealing with delays and penalty clauses by pushing the responsibility down to subcontractors or provisional delays in the contract, such as weather delays. This practice lets the builder remain protected in cases of unforeseen setbacks, please ensure you request for evidence to support the delay claim when it arises.

Budgeting and Financing a House Build

Deposit

It is essential to have a deposit saved up before starting the process. The deposit amount typically ranges between 5% to 20% of the total cost of the project. Most lenders require at least a 10% deposit, but having a higher deposit can increase borrowing power and reduce the need for Lender’s Mortgage Insurance (LMI).

It is crucial to start saving for a deposit well in advance, as it enables buyers to secure a favourable loan and negotiate better terms with the lender.

Cost Estimation

Estimating the cost of building a house is a critical step in budgeting and financing the project. Several factors influence the overall cost, such as location, land type, design, and materials used. Here is a list of common hidden costs to consider when estimating the budget:

• Site Costs: These include costs for soil tests, contour tests, and any additional work required to prepare the site for construction.
• Modifications/Variations: Any changes made to the original design can significantly impact costs.
• Landscaping: Budget for gardening, plants, and other outdoor features.
• Council Fees & Building levy: Permits and inspections required by local councils.
• Delays: Budget for possible delays in construction due to unexpected issues, which can increase overall costs.

To avoid unexpected costs, it is essential to discuss the build in detail with the builder and maintain good communication throughout the construction process. Proper planning and organisation can help minimise changes and reduce the chance of hidden costs.

Take advantage of tools like budgeting spreadsheets and online calculators to estimate project costs more accurately. When budgeting, remember to make allowances for additional costs and potential overruns to ensure a smooth construction process.

What’s Next

Being aware of the multitude of hidden costs when building a house is crucial for a successful construction journey. From understanding site costs and council fees to navigating the complexities of building materials, design, and customisation, prospective homeowners must consider these potential expenses when budgeting and financing their projects. 

Moreover, being mindful of safety and environmental aspects, as well as contingency planning for possible delays, plays a vital role in ensuring a smooth construction process and avoiding unexpected surprises.

By staying informed and proactively addressing these hidden costs, you can lay the foundation for your dream home with confidence and peace of mind. Should you have any questions or require expert guidance on any aspect of building a house, feel free to contact SQM Architects. Our experienced team is always ready to help you navigate the complexities of the building process, ensuring that your dream home becomes a reality.