With what seems like constant and astronomical price rises, a lot of people are spooked by the current costs of building. As architects, we’ve seen the cost of construction shoot up 10-20% since 2020 and it’s challenging to estimate project costs.

So, what is the true cost of building in Melbourne in 2022? And what can you do to get your project completed on budget…

Why have building costs gone stratospheric?

Firstly, let’s get a grip on what’s driving price increases in the building industry, so we can avoid unnecessary blowouts.

Building and renovating costs had been steadily rising prior to 2020, on par with general inflation and a healthy housing market.

But as we’re all bitterly aware, unprecedented times lead to unprecedented circumstances.

A heady combination of labour shortages thanks to COVID and lockdowns, transport and supply chain issues (anyone remember Ever-Given’s Austin Powers-style three-point turn in the Suez Canal?), Australian bushfires wiping out large swathes of plantation timber and, more recently, conflict in Eastern Europe, meant we came down with a world-wide case of supply issues. Couple that with a desire for an extra room for work-from-home life or a freshen up of those walls you’d been staring at for two long years, and our cabin fever developed into reno fever! Cue a demand shock to boot.

The consequences of this monumental supply and demand crisis led to chaotic and astronomical price rises, particularly for two key building ingredients: timber and steel. Labour shortages have also caused an increase in costs in the construction industry.

The good news is, this increased demand is starting to peter out and the supply issues are resolving too.

So, our forecast for the rest of 2022 and beyond is a stabilising of prices and possibly even a fall in building costs. This means now’s the perfect time to start planning your new home or renovating, so you’re ready to strike once things start to slow down.

True cost of building: current building costs 2022 New Homes

So, how much are things actually costing at the moment?

Because building costs are still in flux, it’s a challenge for us to accurately estimate, but we have a number of tools at our disposal to help us to determine the true cost of building. We use a combination of estimating software, Quantity Surveyors, in-depth conversations with builders and tradespeople who have experience on the ground, and our experience with previous projects to inform our estimates. We consider the size of your new home or renovation, the volume of spaces, the number of bathrooms, the size of the kitchen, and the level of finish and fixtures you would like to determine the likely cost of building.

To give you a rough guide, the average construction costs of our projects are currently between $5.5-6k + GST per square metre for new homes and additions. Remember this is an average; if you’re adding a lounge or a new bedroom, that square metre rate may be less and if you’re adding two new bathrooms and a high-end kitchen, chances are it will be higher. The cost of renovating existing spaces is highly dependent on the extent of work required and we would need to see your home and work with you to establish your brief before we could give you an idea of building costs to expect.

Don’t forget these key things when considering building costs

A lot of people make the mistake of only considering the construction costs when they’re thinking about building or renovating. But there are other costs involved; don’t forget to consider these costs:

  • Cost of consultants (this depends on your project, but can include your architect, engineer, land surveyor, building surveyor, geotechnical engineer, energy rater, arborist, town planner and possibly other specialists)
  • Council and other authority charges (application fees for town planning permits, building permits, etc.)
  • Contingencies for unforeseen/latent conditions (these are additional costs associated with things like hitting rock when excavating, or finding your sewer is cracked and needs replacing)
  • GST (bloody Howard)
  • Typically, 75-80% of the total cost of your project is construction. There are substantial other costs to consider in your project than the amount you hand to your builder!

How to keep a lid on building costs

Perhaps Scouts are actually architects-to-be because their motto, Be Prepared, is the key to keeping building costs down. We find the more accurate your initial brief, the better. It means everyone involved has a clear idea of the scope of works and there are fewer opportunities for unexpected surprises. For this reason, we think it’s best to start the building or renovating process with an architect who can help you prepare a thorough brief, and account for all the possible costs in your project.

Bear in mind that your expectations of quality, finish and style can have a big impact on price. When renovating, it’s important to assess how you’re currently utilising the space you have. Sometimes a relatively straightforward rearrangement can dramatically improve the flow and functionality of your home. So much so, you may not need to extend at all! Or, your extension could be much more compact (and affordable). Also remember, a new bedroom is likely going to be a lot cheaper per square metre than a new kitchen or bathroom, so work with an architect to determine what you really need and what will make the most effective use of your existing spaces within your budget.

Here at Northbourne, we offer a Design Diagnosis service which is the perfect way to start your building project and avoid unnecessary building costs. We help you identify the look and feel you want to achieve, what’s possible with your site, the physical amount of space you need, where there might be potential problems with the project, and light a path towards your perfect future home all while keeping in mind what is feasible for you in terms of cost.

Book a free 30-minute chat with Sally from Northbourne to find out how much your project might cost!