The cost to build a house depends on specific factors which may not be obvious to a client but clearly laid out by a construction estimator. Building a house is a complex process which takes into account the client needs to begin with, but during the planning stage, when feasibility studies are done, a client might be forced to compromise on design plans to comply with building codes and regulations in the area. Besides the local building regulations, design plans are also affected by other situations such as ground conditions and terrain. The list of things which can affect the cost of building a house is numerous but for the sake of getting an average estimate, a client should rely on two main items – the construction index and the type of building being built. Let’s get into detail on some of the most important factors affecting the cost of building:
The construction material index in a particular region represents the price escalation (an increase in price) of building materials over the last month(s) or year(s).The overall construction index includes changes in material prices and labor rates.
Why is the construction index important? The building index is important when you are planning to build a house because it affects the building cost per square metre of the project. You have to anticipate material price increases by suppliers during the pre-contract period as well as the construction phase.
To find out the approximate cost of developing your house plan, you have to look for similar homes that were built in your location. If a similar residential home (A) was built last year for 300,000 USD, the cost of building the same home might be slightly or significantly higher in the current year depending on prevailing market conditions.
To calculate the current cost, you have to update the building cost to reflect the current building index. If last year’s average building index was 902, and the current index is 943, then that’s a 4.5% price increase.
Therefore, to build a similar home (A) in the current year would cost US$ 300,000 + (300,000 x 0.045) = US$ 313,500
Type and Size of House
There are different types of residential buildings, and the building rate per square metre will vary for each type of property and its size. The following are 5 types of residential houses that homeowners and property developers can build:
- Apartment Blocks
- Duplex Townhouse
- Private Dwellings
- Low Cost Housing
For each type of property, the cost may differ based on variables such as architectural specifications, gross floor area and location. Thus, apartment blocks, duplex townhouses and private dwellings can be further classified into economic, standard, middle class and luxurious designs. Luxury homes are usually found in affluent neighbourhoods where the cost of land is high, and economic homes are often situated in the high density areas where the majority of the low-income population lives. Middle class and standard houses are more affordable for the middle class group with well paying professional jobs.
Low Cost Housing
Low cost housing is the cheapest of all properties to build because the designs are very basic, the materials are cheap, the size of dwelling is small and each unit can be finished within a short space of time. This is the type of housing that is built on a mass scale by local government and home building associations. This accommodation is designed for low income wage earners and those who cannot afford to buy a standard home.
The cost per m2 for three types of dwellings, starting with the lowest rate, where A is the rate per m2 for building a low-cost house:
- Low Cost House – A
- Economic House – (1 to 1.4) x A
- Standard House – (1.4 to 1.8) x A
Outbuildings are in the same cost range as low cost housing but they are built as separate additional structures in the same yard as the main house. An outbuilding can be a garage, shed or living quarters for servants and guests.
The cost of building per square metre for private dwellings will vary depending on whether it’s an economic, standard, middle class or luxury house design. Lifestyle homes are ultra-luxurious, complex and more expensive than any private dwelling. These are exclusive and exceptional homes for celebrities, business moguls and other personalities of high net worth. Private dwellings afford decent permanent accommodation and more living space than low-cost housing.
The cost per m2 for six types of private dwellings, starting with the lowest rate, where A is the rate per m2 for building an economic house plan:
- Economic – A
- Standard – 1.3 x A
- Middle Class – 1.5 x A
- Luxury House – 1.8 x A
- Exclusive House – 2.9 x A
- Exceptional House – (5 to 10) x A
A duplex house is a single unit or dwelling consisting of two households separated by a floor, wall division, staircase, corridor, lobby or double garage. It can be a double storey unit or side by side unit, each household may have its own private entrance or both households may share a common entrance/lobby with a mezzanine floor.
When comparing the rates, the cost of building an economic duplex house is higher than a private middle class house and in the same cost range as a private luxury house and low-rise apartment block with economic specifications.
An apartment and flat are the same thing. In the USA and Canada, they call it an apartment. In the UK, it’s called a flat. In countries such as South Africa, both terms are used to describe the applicable rental property or construction project.
An apartment is a self-contained space with one or more rooms, comprising a bedroom, bathroom, kitchen area and living room. The subdivisions are made of brickwalls or wall partitions. The self contained space is part of a building block, so there are several other self-contained spaces inside the building complex. An apartment is designed to be compact, to make maximum use of available living space. An apartment complex can be a long block of flats with one or more floors or tall tower block with multiple floors.
Apartment blocks with less than 4 storeys are called Low-rise apartments.
Apartment blocks with 4 to 7 storeys are called Mid-rise apartments.
Apartment blocks with more than 7 storeys are called High-rise apartments.
Whether it’s a low-rise or high-rise apartment, the architectural specifications will determine if it’s an economic, standard, middle class or luxury design. The cost of implementing each design will differ as expected.
Generally, the cost of building per gross floor area, of an economic low-rise apartment block is in the same range as the cost of building a duplex townhouse. The building rate also falls in the same bracket as developing a luxury private dwelling.
Exclusive apartments for the affluent are more expensive, and they offer a lot more privacy, luxury, space and personalization for the owner.
Comparison of Costs:
The choice is yours. For the same cost per square metre, you can build an:
- Economic Duplex Townhouse
- Economic Low-Rise Apartment OR
- Luxury Private Dwelling
Tender Price and Contractor’s Profit
Are you planning to build a house? A quantity surveyor (estimator) has access to building rates for a wide range of projects done in the past and present. Therefore, any client/developer who wants to know the cost of building a house or residential property should hire a quantity surveyor. This construction cost estimator can prepare a quick cost estimate in the planning stage, and eventually detailed Bills of Quantities when architectural drawings are produced.
The pre-contract Bills of Quantities contain the Estimator’s rates which are updated to reflect the current building index. A reasonable allowance for profit is included in the estimate to get an accurate Tender Market figure. These rates are kept private, and they cannot be disclosed to contractors who are bidding for the construction project.
When a contractor buys Tender Documents, they will fill in their rates which are assumed to cover the company’s building costs (labor, plant, material suppliers, transport, supervision etc.)
When filling in the rates, the contractor will include an allowance for profit. The profit margin will create a difference between tender prices submitted by contractors. Depending on the contractor’s costs, a range of profit margins should be expected, but it’s not only the contractor’s mark up which creates a difference in tender values. A lot of other considerations such as the selected material supplier, hiring plant, size of workforce, availability of materials etc, will affect the tender value.
When the tender is closed, the Tender Evaluator will choose the best contractor whose tender value is within range with the Estimator’s figure.
Building Costs in Various Countries:
South Africa – STATSSA