How much will your new house cost to build?

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How much will your new house cost and can you afford it?
This is often as far as many new home build projects get! You must estimate an accurate cost for constructing the house (taking account of all the costs, see: Have you allowed all the costs of your home build part 1 and Have you allowed all the costs of your new home build part 2), then calculate the cash flow of these costs (when bills have to be paid – I'll discuss this in a future article in more detail), and then balancing this against the money that’s available now, as well as the income that you will earn while the project is in progress, or which will come from the sale of assets, or from bank loans. It’s advisable to add a contingency to these costs, as well as erring on the side of caution when calculating the income you expect to earn.
There are a number of ways of obtaining a cost estimate:

• Knowing the cost of a similar house it’s possible to adjust this price, taking into account the different location, differences between the houses (including size), and the price increases which have occurred since that house was completed.
• Using the estimated square metres of your house it’s possible to get rough square metre construction prices from contractors. It’s important to note that the finishes you want could significantly impact this estimate. (See previous articles: What influences house building costs part 1 and What influences house building costs part 2.)
• Approaching professional quantity surveyors, or estimators, to provide a budget estimate, using information from houses you like.
• A preliminary design, or sketches, could be prepared for your proposed new house and contractors asked to provide indicative prices for the house.

The more detailed your design and information, the more accurate your price will be.
If there appears to be sufficient finances to cover the cost of the project consideration can be given to proceeding further. If the project is too expensive there may be other alternatives such as:

• Reducing the size of the project.
• Building the project in a number of phases to suit the available finance.
• Looking at ways to reduce the construction costs. (See previous articles on what influences building costs.)
• Using cheaper materials or finishes.
• Seeking ways to obtain additional finance, such as obtaining bank loans or selling other assets.
• Considering ways of reducing everyday living expenses so more money is available for construction.
• Deferring the project until there’s sufficient money available.

Estimating costs and income might go through a number of iterations, which start off with very simple estimates. If these appears to validate the project a more detailed exercise can be performed. This exercise should be repeated through the life of the project, in particular, when the detailed design is completed, and before the contractor is appointed. It should also be redone every time there’s a major change to the project, or when conditions or income change. At any stage it could be found that the house is no longer affordable and ways to reduce costs or increase income need to be found. Continuously keeping track of income and costs will allow you to make timely adjustments to ensure the project can be completed without running short of cash.

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​For more valuable house building and home renovation tips and advice read: 'An Introduction to Building and Renovating Houses - Volume 1 Hiring Contractors, Managing Construction and Finishing Your Home' and 'Volume 2 Finding Your Ideal Property and Designing Your Dream Home'

​This is an extract from: 'An Introduction to Building and Renovating Houses Volume 2' by Paul Netscher. Available in paper or eBook from Amazon.com, Amazon UK, Amazon CA, Amazon AU and all online bookstores. To read more

​© 2018 This article is not to be reproduced for commercial purposes without written permission from the author.

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