In the past 10 years, construction of new houses and residential buildings across Australia, particularly in Melbourne and Sydney had almost come to a standstill. With inflation on the rise, there wasn’t much happening on the construction scene. However, in the years, Australian population grew so did the number of immigrants to the country thus arising the need of more residential communities and eventually leading to the current construction boom.
Currently, the construction scene around Australia is so happening that most big builders don’t have time cater to regular home renovations. However, with all the construction boom happening, there’s no doubt in the fact that the cost of constructing houses from scratch has skyrocketed. In February last year, it was reported that the price for construction of new houses surged by a massive 4% across Australia.
Here are some of the top reasons why building houses has become costlier.
Property Price Hike: In order to construct the house of your dream from scratch, you will obviously need to have a piece of land to build on. If you already own a piece of land, you might not face the brunt but if you are on the look out for a property to purchase and build you home on, you are in for a shocker. With the latest construction boom, the property market across the Australian big cities has surged massively thus making house construction from scratch costlier.
Mortgage Rate Drop: While the Australian economy is in its recovery phase after the covid-19 pandemic lockdown, the mortgage interest rates are at a record low, instigating buyers to reap the benefits before the mortgage rates rise again. This has led to a disruption in the demand and supply chain. With more and more people buying properties, the construction continues in full swing thus contributing to a shortage of tradesmen and increasing the costs.
Raw Material & Transport Costs: Material cost has increased significantly in the last few years particularly steel and timber because of the high demand and limited supply thus contributing to an increase in the cost of building houses. In addition to the raw material, with a rise in fuel prices, transportation costs have also increased adding fuel to the fire of swelling prices.
Documentation & Regulatory Costs: One of the key reasons that people choose to buy constructed home instead of building from the scratch is the additional documentation and regulatory costs which go into constructing homes. From design permits to land permits and detailed approval processes, the documentation and regulatory cost add quite a big chunk to the expense. Added taxation and an increase in these regulatory costs, has had a direct impact on the pricing of home construction thus making building homes from scratch pricier.
If you are considering building a home from scratch, you might want to first check out our tips before you head on to buy a new property.