Key Points
- Your new house can be a project home or architecturally designed.
- Size and upgrades will significantly increase the cost of building.
- You can apply to become an owner builder.
Every year in Australia many people fulfil their dream of buying a place they can call home, but buying an already-built home is not the preferred option for some. They might want to build it from scratch to create a home tailored to their specific design preferences and desired features.
Justin Hill is CEO of JSH Projects. He explains what one needs to do after buying a piece of land .
“You'll buy the land without a dwelling on there. Then you'll have to go through all the approvals to get development applications, construction, certificates, secure a builder and then go on to build the house that you've designed on that block of land.”
How to get your finances done
Securing finance both for land and construction can make the process easier. Sandip Nagadiya is a mortgage broker at Centrum Finance Solutions based in Sydney. He advises that it's better to apply for both loans together.
“We can apply for the loan of the land and construction together. That would be the ideal scenario. What majority of the banks do is [that] their construction approval is valid for one year. For example, if you have the construction contract, if you have the building permit and if you have all the documents, the bank will give you the full approval.”
Mr Nagadiya also recommends including a clause in the contract that locks in the cost for a specific period, ensuring you’re protected from any unexpected price increases.
“Always ensure you go for the fixed-price building contract. Fixed-price building contract means take the in the building contract, always put the clause that there should be 120 days or six months, the price should not be increased... [The] second thing is that as soon as the land gets settled, always aim to start the construction as soon as possible because the more and more you have the construction delayed, the more you have to pay interest.”
Try to secure a loan for both land and construction. Source: Moment RF / Andrew Merry/Getty Images
Mr Hill says having detailed discussions with a builder is essential to ensure that the project stays within the anticipated budget. This step helps avoid unexpected costs and ensures a smoother construction process.
“Once you've set out the purchase price for the land, then you really need to sit down with a builder and discuss the budget and how much you have to spend for the build. So you don't want to over capitalise."
You also need a contingency there, which is generally at least 10 per cent in case the build goes over.Justin Hill, CEO, JSH Projects
"The most important aspect of a build budget is to design the home to that budget before the drawings are done,” he adds.
Justin Hill, CEO, JSH Projects
How many types of builders are there?
There are generally two types of home builders in Australia: project home builders and architecture home builders.
“With a project home builder, they will have drawings or designs already on their website that they can bring to you," Mr Hill explains.
"And as long as those drawings and designs suit the block that you've purchased such as width [and] size... is it sloped or level? Then they'll have a certain amount of homes or designs that you can pick from for that block.
"Then when you go into an architectural home builder, you will design that home with the architect and more preferably with the builder. They won't have them on hand just to provide them to you. You will suit it to the block that you buy.”
Whether you choose a project home or an architecturally designed home, the larger the build, the higher the cost will be. Size plays a significant role in determining the overall expenses of construction.
“You have a basic package that will be smaller homes. Everything is based off square metres. So the biggest cost for a build is additional square metres. The more additional square metres, the more the cost,” Mr Hill says.
Costs will depend on size and any upgrades. Source: Moment RF / Andrew Merry/Getty Images
“Generally each project home builder will have additional upgrade packages. That might be upgraded appliances, tapware, all sort of items like that... And they'll have premium ranges... which will be fully rendered all the way around, have a lot more street appeal, double story, but that might cost you double that, by the time you finish. That's generally how the project homes will work.”
Following the designs and plans provided by project home builders will make the approval process and construction quicker and more cost-effective. Pre-designed plans often streamline the process, reducing both time and expense.
“Generally the project home builders, it's better to stay within their design and within the drawings that they have already got established in their business because they have a build model for that. They can get their approvals a lot quicker on the land and generally, any changes you make to those provided drawings or designs that are already in house will definitely cost you a lot more than what it would per square metre for the design that you're already paying for,” Mr Hill says.
While an architecturally designed home may be more expensive than a project home, you are designing it from the ground up. This means there are no additional costs for making changes later on. This allows for a more personalised design without the need for costly modifications down the line.
Sticking to the project builder's designs will make the construction quicker and more cost-effective. Credit: courtneyk/Getty Images
Owner builder
In addition to working with conventional builders to construct your home, there is the option to take on the role of an owner-builder. Obtaining an owner-builder license allows you to project manage your own house, giving you the authority to supervise and coordinate various trades for the construction process. This approach provides greater control over the project and can lead to potential savings.
“You can be an owner builder so you can apply for an owner-builder permit. So that allows you to project manage your own home. However, you still have to be contracting the qualified trade, so their profession. But you can be the sole builder under an owner-builder permit, which you can apply for at least once every five years,” Mr Hill says.
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