Guide
to Preparing a Building Budget
INTRODUCTION
This
guide has been prepared to assist
the home owner in understanding and
establishing a suitable &
realistic budget for their
renovation project or new home.
It
is suggested that you discuss this
guide with your architect before
beginning the design process.
Once
you have a design and sketch plans
to a sufficient level of detail we
suggest you have a specific costing
prepared by either a builder,
quantity surveyor (QS) or building
cost estimator. This should be
prepared prior to any council
submission on projects that are cost
sensitive.
Why
is an accurate budget important?
Along
with the fabric of your existing
home, your site and councils’
building controls, your building
budget is a major constraint within
which we design.
It
is important to consider your budget
options carefully as different
development approaches and budget
amounts can result in very different
design results.
For
example, if a workable budget is not
clear at the starting point (i.e.
too low) then many good design
opportunities may be discarded
because they are feared as too
expensive. When this occurs it may
be difficult to achieve the desired
brief even when the budget is
adjusted later.
What
guides your budget?
The
budgets for most renovations or new
home projects are determined by the
chosen design approach.
Below
are some typical examples;
Investment
budget
This
approach is concerned with
maximizing the rental return or
rentability of an investment
property. It may also be concerned
with achieving long term capital
growth, whilst minimizing ongoing
running and maintenance costs.
Development
budget
This
approach is primarily concerned with
resale profit immediately following
or up to 2 years after completion.
In this budget the brief is
formulated and costed to achieve
this profit.
Capitalisation
conscious budget
This
budget is capped to avoid the risk
of over capitalization on the
property, which may arise if the
money spent improving the property
added to its
current
value, exceeds the likely resale
value. The risk of over
capitalization depends very much on
the location of the property, the
quality of the work done, the
amenity added and the health of the
market during the time it takes to
complete.
Affordability
budget
This
budget is concerned with making the
best use of the limited funds
available and requires a design that
achieves excellent value for money.
On these kinds of
projects
the scope of the brief is restricted
by the budget.
Staging
budget
A
staged budget approach comes about
because the entire budget for the
desired design is not available in
one lump sum, but may be available
in two or more installments. The
brief for this kind of project is
then concerned with creating a
masterplan design that can be
completed in stages. Note: Because
council approvals don’t last
indefinitely, all stages should be
started within the 2-5 years of the
approval.
No
budget
For
many projects the final budget is
born out of the brief and the
architects design - not driven by
the budget. This is not to say the
budget is limitless - simply that
amenity, style, features and finish
take precedence over cost.
Budgets
in Summary:
Most
budgets are determined with the
assistance of other experts, such
as;
•
Real estate agents
•
Banks and mortgage brokers
•
Investment consultants and
solicitors
•
Builders and building cost
estimators
•
Your architect
Once
you have decided on the type of
budget you have, you will find out
the amount of budget a bit easier.
What
building options do I have to meet
my budget?
Your
options will vary depending on
whether you are renovating or
building new.
Project
Homes:
These
are homes which are designed to be
built in large numbers from a range
of off-the-shelf designs.
Advantages:
•
Represent excellent value
for money
•
Are very affordable
Disadvantages:
•
Not designed to suit your
block
•
The design doesn’t take
into account factors such as
orientation to the sun, views,
neighbours, etc.
•
Can usually only be built
on level or near level sites
•
Not specifically designed
to be ‘in-keeping’ with area
•
Usually have a shorter
effective life
•
Can only be used to build
new homes, not renovations or
additions
•
Many are considered ugly
and their style can be very ‘in’ at
the time they are built, but date
quickly
•
Always cheaply built
•
Easily recognized so they
have a reduced resale value
Design
and construct projects:
This
is where a building company quotes
to build or renovate your home and
includes the design as a package. It is a good way of
knowing what the final costs are
from the beginning and some of the
better ones use architects for the
design work.
Advantages:
•
Are designed specifically
for your site and needs
•
Total cost includes the
design process
•
Saves you the time and
trouble of finding a builder and
going to tender
Disadvantages:
•
They are designed more for
profitability than for good design,
quality or aesthetics
•
You get a design that you
must build with this builder - no
tendering or taking the design
elsewhere
•
Not every style of home is
suitable for this kind of service
i.e. some companies just do upper
level additions to certain types of
homes only.
Architect
/ designer homes &
renovations:
This
is the best but also the most
expensive way to design your home or
renovations. Some architect-designed
homes can be very inexpensive, while
others can be quite lavish and fit
into the luxury category. Some of
the reasons that architect-designed
homes are usually more expensive
than project or design and construct
homes are because of the closer
attention to detail, the greater use
of glass, more expensive finishes
and the designs are one-off to suit
your site and your brief.
Advantages:
•
Custom-designed to meet
your individual needs
•
Unlimited choice of style
or aesthetic expression
•
Enhanced resale value
•
Generally well-built with
excellent attention to detail
•
Designed to optimize your
site’s orientation to the sun,
capitalize on views, enhance privacy
and generally increase enjoyment.
•
Can be used for
renovations on any type of home or
site
•
Architects are also
skilled at incorporating specific
requirements such as
environmentally-friendly design
Disadvantages:
•
More expensive than
project homes or design &
construct for the floor area and
amenities provided
•
Less control over the
total cost than with project homes
or design and construct
What
do buildings cost overall per
square metre?
Below
is a guide to the average building
cost per square metre for the
different home building options
available to you. These are very
general and should only be used as a
rough guide.
$
Cost / Square metre *
$900
- $1500 / sqm Project homes
$1700
- $3000 / sqm Design + Construct
projects
$2500
- $4000 / sqm* Architect designed
homes & renovations
*Some
luxury homes cost much more than
this.
Example
1:
*
A
two storey 4 bedroom house with 2.5
bathrooms & a double garage,
having a total gross floor area of
250 square metres could cost approx.
$225 - $375,000 Project
homes
$425
- $750,000 Design and Construct
projects
$625
- 1,000,000 Architect designed homes
and renovations
$1,000,000
plus Luxury home
This
example is based upon using standard
forms of construction. Where a more
cost effective solution is required,
alternative building systems may
need to be considered.
*Based
on costs dated September 2008
How
much can building costs vary?
Building
costs can vary enormously depending
on the type of construction you
choose. An example of this would be
the type of roofing you choose for
your building.
Below
is a list of common roofing
materials for the purpose of
comparison;
Example
2:*
$65-80/sqm
Concrete
tile roof
$75-110/sqm
Terra
cotta tile roof
$80-100/sqm
Colorbond
metal roof
$160-220/sqm
Ceramic
slate roof (Nu-Lok)
$180-240/sqm
Spanish
slate roof (Nu-Lok)
$220-300/sqm
Spanish
slate roof
$250-300/sqm
Welsh
slate roof (Nu-Lok)
$320-450/sqm
Welsh
slate roof
$550-700/sqm
Zinc
roof
$600-900/sqm
Copper roof
These
costs are approximate only and
include materials and labour but no
sarking, insulation, flashing,
guttering or main roof structure.
The cost can also depend on the
complexity of the roof design and
economies of scale.
*Based
on costs provided by Nu-Lok Roofing
Systems dated 2009
What
does my budget need to cover?
Perhaps
the best way to look at what should
be included in the budget for your
project is to look at a completed
project.
Example
3:*
The
following breakdown is of a new
160sqm single storey weatherboard
beach house with a colorbond roof.
It has 3 bedrooms, study, open plan
kitchen and living areas, main
bathroom, ensuite, powder room,
double carport, lock up storage,
large entertaining deck and a
motorized pergola.
List
of completed costs:
$232,000
Building
envelope
$
58,000 Kitchen, laundry and wardrobe
/ storage fit-outs
$
42,000 Bathroom, ensuite and powder
room fit-outs
$
34,000 Double carport and driveway
$
30,000 Decks, retaining walls,
landscaping & fencing
$
12,000 Motorised pergola (Vergola).
$408,000
Total building costs
$
40,000 Architect’s fees
$
12,000 Curtains, blinds & other
fittings
$
9,500 Surveyor, structural engineer,
quantity surveyor
$
5,500 Council and building
certification fees
$475,000
Total costs
*Based
on costs dated September 2008
The
contingency sum:
What
this example doesn't illustrate is
the amount originally budgeted and
the amount of contingency set aside.
A contingency sum is often used to
cover additional costs incurred for
unforeseen / additional building
repairs, landscaping or site works.
A
reasonable contingency to allow in
your budget would be 5-10% for new
homes and can be up to 20% for
renovations, alterations and
additions homes.
What
sorts of things can effect the cost
of building?
Building
costs can vary considerably,
depending upon a number of factors.
Some of which are as follows;
Site
issues:
Slope
of the site
The
steeper the site the more it usually
costs to build on it. This is
because foundations and supporting
structures are more difficult,
excavation and the need for
retaining walls increases, and more
complex drainage issues arise. More
space is usually wasted in basement
and foundations, because buildings
often step up the slope and there is
a greater perimeter to enclosed area
ratio.
Ease
of access to the site
Poor
access makes materials handling
difficult and more time consuming,
which increases the labour cost
component.
Ground
or foundation conditions
Poor
foundations
may require additional engineering
and structure to support your home.
Sandy or clay soils can require deep
piles to achieve an adequate
footing.
Excavation
in rock
Rock
excavation can be expensive and
drainage issues may be more costly
to resolve.
Demolition
& clearing the site
In
some cases this can be as much as
10% of the overall cost of building
a new home.
Availability
of services
Such
as water supply, stormwater, sewer
lines, electricity, gas and phone.
Distance from mains can also be an
issue. Particular council or
government requirements such as the
need for basement parking, onsite
stormwater detention, rainwater
storage or grey water systems,
septic sewage systems.
Your
suburb or location
Building
work generally costs more in the
city than the country and even more
in the most affluent suburbs. This
is often because expectations of
service & quality are also
higher.
Design
issues:
Size
of project
Probably
the biggest factor in the cost of
building work. This includes the
buildings total floor area, bulk or
volume, number of storeys, ratio of
envelope to useable floor area.
Development
control legislation
Planning
and Building controls can
dramatically effect the cost of a
project and often vary from state to
state or across different councils.
Examples include; requirements for
parking, geotechnical and other site
issues, rural fire service,
stormwater detention and minimum
standards.
Simplicity
& repetition
Sometimes
a design will make good use of
simple building shapes and
repetitive structural elements to
reduce a building’s cost per
square metre.
Fit-out,
fixtures and finishes
The
number of fit-out areas such as
bathrooms, ensuites, kitchens,
laundries etc. adds greatly to the
cost of a project as these are quite
intensive on plumbing, electrical,
joinery, fixtures and fittings.
Economy
or tightness of design
Part
of the design process involves
careful consideration of space use
and minimise waste. In poorly
designed homes, circulation space
can blow out and reduce the level of
amenity possible for the same
budget.
Design
quality & individuality
A
truly individual design with a large
number of custom made elements, will
cost more than a design with
standard ‘off the shelf’ elements.
Using standard industry practices
and materials will generally reduce
cost as compared to ‘one-off’
solutions.
Accuracy
of documents
The
completeness and proper
co-ordination of contract &
construction documents can be an
important factor in the cost of
construction because it can effect
the accuracy of tendering, changes
and additional work, and also create
claims for undocumented or extra
work during construction.
\
Building
issues:
Number
and type of trades
Each
new trade involved in a building
project will add cost directly and
require overall co-ordination from
the builder. A good way to reduce
overall building cost is to reduce
the number of building trades.
New
or existing work
Building
new is cheaper than alterations,
additions and renovations.
Choice
of builder & individual trades
Building
prices do vary across the industry
due to size, style of operation,
popularity, profile and expertise.
The
type, method & materials of
construction
Traditional
or standard forms of construction
are generally cheaper than newer or
more alternative systems.
Economies
of scale
Generally
medium
to large size construction projects
are more economical than smaller
ones. This is the same for each of
the trades involved and is largely
because of the high set-up costs
associated with construction
projects.
Market
forces
This
can be described as fluctuations in
the cost or availability of building
materials, an under or oversupply of
tradesmen and specialist contractors
along with interest rates and other
industry factors.
Contractual
conditions
The
form of building contract, such as
‘lump sum’ or ’do and charge’ may
also effect building cost. This is
also true of onerous terms or
conditions of tender such as a tight
construction program, which may make
keen pricing more difficult.
Legislative
controls
These
issues such as home owners warranty
insurance, occupational health and
safety, training and continuing
education, licensing etc. with which
builders must comply and may also
effect the cost of building work.
How
do architect’s fees work?
As
sites, briefs and budgets differ
from project to project, so too the
scope and level of architect’s
services also vary. To account for
these differences architects
generally offer a range of ways to
charge for their services.
Percentage
based fees:
Traditionally,
architects
will charge a fee based on a
percentage of the final building
cost. Small projects attract a
larger percentage and larger
projects usually attract a smaller
percentage. For example a $50,000
job often has the same number of
things to do as would a $600,000 job
but lacks economy of scale.
Therefore the overall fee (full
service) for an $50,000 project
could be as high as 18% ($9,000)
while the $600,000 project may have
a fee of 10% ($60,000) to complete
all the work required. Larger
projects may have an even lower
percentage fee depending upon the
complexity of the brief and other
factors. The scope of the service
can still vary - with each stage
having its own percentage charge.
This system is reasonably fair to
both parties because the final fee
payable to the architect is based on
the the contracted final cost of the
construction work.
Lump
sum or fixed fees:
Lump
sum or fixed price fees are based on
a calculation of the amount of work
involved. Lump sum fees are not as
common as percentage fees since
there is more work to do costing a
project (which the architect may not
get) and because the architect
carries the risk of losing money if
the fee is not adequate. The
advantage to the client is that they
know the cost upfront and this is
independent of the cost of the
building. The disadvantage is that
with most fixed fee agreements an
additional fee component is added to
help balance the risk of under
quoting. Additional fees are still
payable if the scope or the brief or
service grows.
Hourly
rate fees:
Many
architects today charge simply for
the work they do on an hourly rate
basis. This is a do and charge
system which can work well for small
projects and for sole practitioners
as there is no quoting to do and
clients pay no additional margin. It
also works well on projects which
may be difficult but could also turn
out to be resolved quicker than
expected - but the reverse can also
be true.
Combination
fixed & hourly rate fees:
As
the requirements and regulations for
residential projects increases year
by year, some architects offer their
clients a combination of fixed fees
and hourly rates. This system gives
the client a good idea of the likely
costs involved, but allows the
architect to quote more keenly and
with less fear of underquoting or
losing money because the final cost
of the work can be adjusted to suit
the scope of work and level of
service provided.
Have
you considered a Masterplan
Design?
One
way around having to design to a
fixed budget is to have your
architect consider a ‘masterplan’
design. This involves looking at the
best use of your site, home etc.
without too much concern for cost –
although we often still consider
likely resale values. Once you have
a map of your ‘ideal’ design, you
can then look at how you might break
it up into stages and complete it
over time as more funds become
available. This way, at least you
know that everything you do to your
home is part of a bigger picture.
Is
my budget compatible with my
design brief?
Your
‘brief’ is the description of what
you want your proposed
building work to achieve, i.e. an
extra bathroom, new master suite,
more lightin the living room,
improved indoor – outdoor flow …. In
every brief there are some factors
you can change and some you can’t.
If you have any budget concerns you
may need to determine which factors
you are prepared to be flexible on
and which you are not. The following
are some key factors for determining
how much your project is likely to
cost:
Size:
This
is measured in square metres and
represents the amount of additional
area you want to add to your home,
or the amount you plan to
substantially change. This is
usually
called Gross Floor Area.
Fit-out
areas:
The
number of detailed fit-out areas -
such as kitchens, bathrooms,
laundries, powder rooms, en-suites,
wardrobes etc.
Construction
Materials:
Are
you looking to build in full brick
or weatherboard? Will you want a
traditional slate or corrugated
metal roof?
Complexity:
Are
you planning a relatively simple
addition or will it need careful
integration into the design of your
existing home?
Quality:
This
includes your choice of finishes,
fixtures, fittings and accessories
such as floor finishes, kitchen
appliances, lighting and home
automation systems and other
devices.
Design
features:
These
include those special improvements
that can make a real difference to a
home and your lifestyle, such as
cabanas, lap pools, conservatories,
grand staircases.
Summary
/ Checklist:
Building
costs (and therefore budgets) are
impacted by a large number of
factors. Understanding these factors
and their possible effect on your
project is an important part of
preparing an accurate brief and
budget. Once again this guide is
designed to highlight many of the
issues you may need to discuss with
your architect or financial
advisors. The following is a simple
summary / checklist based on the
information discussed;
•
Work out what sort of
budget you have, what guides it and
how this might effect your brief.
•
Look at what options you
have and what your budget needs to
include to achieve your brief - such
as staging the work or selecting a
project home.
•
Discuss your current
budget and brief with your architect
to ensure they are compatible &
make any changes before you start
the design process.
