How Much Does It Cost to Build a House in Australia?

The cost of building a new house in Australia has surged over the past few years as supply and trade shortages continue to weigh on the market.

And at the same time, the construction industry has seen a surge in insolvencies as rising labour costs, extreme weather, high material costs and shortages and global supply chain issues forced many to close their doors.

And that means that surviving builders are placing hefty margins on new contracts to ensure they remain solvent.

So how much can you expect to spend when building a house in Australia today?

The answer to this could be summed up with that frustrating yet often accurate phrase:

How long is a piece of string?

There are a number of different factors that can affect the cost of building a house, including but not limited to:

• The size of the dwelling
• The location and availability of resources on the slope of the land
• The quality of the fixtures and fittings

But with this in mind, there are some “ballpark figures” I can come up with, to give you a guide as to how much it may cost you to build a property.

But it’s worth keeping in mind that, when building a new home, the final cost of construction can differ vastly from the expectations set out at the building approval stage, and even at the start of construction.

Why?

There are numerous reasons for cost variation prior to and during construction – for example, costs and contracts may be finalised after council approval is sought or there may be unexpected delays and complications during construction.

To guestimate the cost of building a new home, consider the following:

• 40-45% of costs of the total cost to build is the cost of materials
• 35-40% of the total cost is labour
• There are many taxes and charges, insurance, and overheads
• And the builder would like to make a profit margin of around 15-20%

Why have building costs skyrocketed?

It all started a few years ago with COVID-related restrictions.

Thanks to volatile exchange rates, supply chains being impacted, and reduced productivity due to COVID-19 restrictions, floods and rains, costs have risen and the time to complete projects has dragged out pushing up the cost of construction.

Then there are the supply chain issues around the world due to the Russian-Ukraine war and things are getting worse.

The shortage of materials and labour is likely to significantly increase housing construction costs over the next couple of years.

Currently, the rate of increase in building costs is slowing and the supply chain is stabilising, but the critical shortage of skilled labour, compounded by the collapse of a number of building companies, is still keeping costs elevated.

Let’s start with a look at how building costs have changed around Australia…

The latest CoreLogic – Cordell Construction Cost Index

National

The Cordell Construction Cost Index (CCCI) recorded a growth rate of 0.8% over the three months to December.

This marks a reversal of the easing trend seen over the previous four quarters when the quarterly CCCI reading went from 4.7% in Q3 2022 to 0.5% in Q3 2023.

The annual growth rate for the 2023 calendar year was 2.9%.

At 2.9%, the latest 12-month increase was the smallest annual rise in the national CCCI since the year to March 2007 (2.7%) and below the pre-COVID decade average (4.0%).

According to Corelogic economist Kaytlin Ezzy, this reacceleration is more a return to trend rather than a new surge in construction costs.

“This suggests that growth in construction costs have normalised after recording a recent peak of 11.9% over the 12 months to December 2022, albeit at a higher level,” she said.

“Although 26.6% higher than at the onset of the pandemic, the recent surge in CCCI is below the increases seen across national house values, with CoreLogic’s Home Value Index rising 36.5% over the same period.”

Source: CoreLogic

According to the Cordell costings team, pricing remains generally unsettled, with no clear trend seen across most product types.

Depending on the supplier, both increases and decreases were recorded in timber and metal prices, although we have seen rises in the price of hardware and chemical items.

Price rises also varied across the states, with an increased growth rate seen in NSW, VIC and WA, while SA and QLD both saw a reduction in quarterly CCCI growth.

This quarter’s relatively flat result in QLD has helped bring QLD growth rates back in line with the other states after recording a stronger increase over the past two years. 

While up over the quarter, the annual change in residential construction costs continued to ease as larger quarterly increases fell out of the annual calculation.

At 2.9%, the latest 12-month increase was the smallest annual rise in the national CCCI since the year to March 2007 (2.7%) and below the pre-COVID decade average (4.0%).

This suggests that growth in construction costs has normalised after recording a recent peak of 11.9% over the 12 months to December 2022, albeit at a higher level.

Although 26.6% higher than at the onset of the pandemic, the recent surge in CCCI is below the increases seen across national dwelling values, with CoreLogic’s Home Value Index rising 31.3% over the same period (36.5% for houses and 15.7% for units).

New South Wales

The CCCI for NSW rose 1.0% over the December quarter, up 40 basis points from the 0.6% rise seen over the September quarter.

Although up quarter-on-quarter, the latest result is only 10 basis points above the pre-COVID decade average of 0.9%, suggesting the uptick is more of a normalisation in growth patterns instead of the start of a new growth cycle, the report explains.

This is supported by the annual result, which eased to 3.1%, the state’s lowest annual change since the 12 months to March 2021 (2.9%).

Source: CoreLogic

Similar to the national trend, NSW dwelling approvals remain sluggish.

Monthly new dwelling approvals remained -26.6% below the decade average at the end of November, which should help add downward pressure on construction cost increases as the flow of approved projects commencing slows down.

While growth in construction costs has seen a mild uptick over the quarter, growing affordability pressures, low consumer sentiment and looser supply levels saw the pace of growth across NSW dwelling values continue to ease, from 2.2% over the September quarter to 0.9% over the three months to December.

NSW’s median dwelling value came in just below $950,000 at the end of 2023 – the median house value reached $1,034,204 and the median unit value rose to $783,488.

Victoria

Victoria recorded the largest quarterly increase in construction costs among the states, with the CCCI rising 1.1% over the December quarter.

This rise came after a relatively mild increase over the three months to September (0.3%), making it the fastest acceleration in construction cost increases among the states.

Despite the quarterly rise, the annual increase in the Victorian CCCI continued to ease to 2.9% over the 2023 calendar year.

This is down from a recent high of 13.0% over 2022 and is Victoria’s lowest annual change since the 2016 calendar year (2.6%).

Source: CoreLogic

The quarterly uptick in construction costs comes as the change in Victorian dwelling values shifts into negative territory, falling -0.1% over the December quarter, driven by a -0.2% decline in Melbourne dwelling values.

As of December 2022, Melbourne’s median dwelling value came in at $780,457, while regional Victoria’s median was a more affordable $564,983.

After tracking below average through much of 2023, Victoria’s new dwelling approvals normalised in November.

While most other states’ monthly count of new dwelling approvals was well below the decade average, Victoria’s count came in just -0.2% below average at 5,341.

Queensland

In Queensland, the CCCI increased by 0.8% over the September quarter.

Unlike the other states and the national index, Queensland was the only location where growth in the CCCI accelerated through the quarter.

The increase was up 10 basis points in the three months to June but was still well below the recent peak of 5.8% in the September quarter of 2022.

The quarterly growth rate in the Queensland CCCI was also below the pre-COVID decade average of 1.1%.

The CCCI measure also shows Queensland has had the greatest cumulative increase of the states in residential construction costs since the onset of the pandemic, at 28.4%.

Source: CoreLogic

The CoreLogic home value index revealed that it saw Queensland dwelling values increase 3.0% over the final quarter of 2023, with Brisbane and Regional Queensland values up 3.7% and 2.3%, respectively.

As of December 2023, QLD’s median house value sat at $768,502, while the median value of a unit was $578,207.

Monthly dwelling approvals across Queensland remained -20.0% below the decade average at the end of November but a temporary boost to the First Home Owners grant introduced in mid-November could help boost approvals over the coming months.

Western Australia

In WA, the CCCI showed construction costs rose 0.7% over the December 2023 quarter, up 50 basis points from the 0.2% rise seen in the previous quarter.

While up over the quarter, WA’s latest result remained 10 basis points below the national increase (0.8%) in December and 20 basis points below the average quarterly rise seen across WA in the decade to COVID (0.9%).

Annually, WA’s CCCI increased by 2.3%, which was the lowest annual rate among the states and it also recorded the lowest cumulative increase in construction costs since the onset of the pandemic, up 24.5% compared to a 26.6% rise nationally.

Over the same period, the report saw WA has seen established dwelling values rise by 47.3%.

While most of the other states are starting to see a slowdown in value growth, WA still recorded a strong quarterly result (4.9%), thanks to its relatively affordable median dwelling value ($627,945), low advertised supply levels and strong economic conditions.

Over the 2023 calendar year, WA recorded an average of 1,150 new dwelling approvals per month, which is -34.5% below the previous decade’s average.

South Australia

South Australia saw the CCCI increase by 0.5% over the three months to December 2023, down from the 0.6% increase over the September quarter.

This took the latest quarter’s result 40 basis points below the pre-COVID decade average (0.9%).

It is the lowest quarterly increase since the September quarter of 2019 (0.5%) before COVID-related material constraints and HomeBuilder demand saw residential construction costs surge.

Similar to the quarterly trend, SA’s annual change in construction costs dropped a further 1.3 percentage points over the December quarter to 2.8% over the 2023 calendar year.

This is down from a peak of 10.5% seen over the 2022 calendar year.

The continued easing in SA’s CCCI results is somewhat surprising given that monthly new dwelling approvals across the state have been roughly in line with the previous decade’s average over the past year, which should be adding upward pressure to construction costs.

Although in line with the decade average, new dwelling approvals are tracking lower than the high levels seen through 2021 and part of 2022.

While growth in construction costs is easing, SA’s housing values are still recording strong growth, with the HVI rising 3.4% over the quarter and 8.9% over the year.

As of December 2023, SA’s median dwelling value was $648,656.

Building costs growth forecast for the year ahead

Source: Domain

New code changes pushed up building costs even more

All residential construction must adhere to comprehensive building codes and standards governed by local and state laws.

Recently introduced new national home building codes designed to ensure more liveable housing and energy efficiency are tipped to drive up the price of an average home by a further $30,000, according to the Master Builders Association.

The changes were introduced from October 1 last year in Queensland and will be implemented from May 1, 2024.

Queensland MBA chief executive Paul Bidwell said the increases come on the back of a sharp increase in the cost to build a new home in the past three years.

“We have supported inclusive, sustainable and affordable housing and been in discussions with government and stakeholders for years – however, in the face of a housing crisis and rising costs, do not believe now is the right time to introduce these changes.”

Average house building costs in Australia

While the stats above suggest the cost to build a new home is not growing as fast as before, for the last few years house building costs across all major Australian markets have been growing faster than inflation.

Disruptions caused by COVID-19 were largely to blame in 2021-22 with global supply chain issues negatively impacting both material delivery and pricing, while state and international border closures led to intractable labour shortages.

Meanwhile, in 2023, the Russia-Ukraine war’s effect on the cost of oil and aluminium, transport blockages, and supply chain shortages had an impact on further price increases.

The average cost to build a house per square metre

BMT Quantity Surveyors’ latest report shows the average cost to build a house per square metre of new single and double-storey dwellings throughout Australia for 2024.

The costs in the table below are for Sydney, but you can still use them as a guide by applying one of the following regional variation percentages.

This will give you an approximate cost for the construction type per square metre in your area.

• Cairns – 110% – 130%
• Brisbane – 95% – 115%
• Sydney – 100% – 100%
• Canberra – 92% – 120%
• Melbourne – 95% – 105%
• Hobart – 95% – 120%
• Adelaide – 95% – 108%
• Perth – 98% – 120%
• Darwin – 110% – 135%

Average costs to build a house

Source: BMT Quantity Surveyors

Average costs to build a townhouse

Source: BMT Quantity Surveyors

Average costs to build units

Source: BMT Quantity Surveyors

Average industrial construction costs

Source: BMT Quantity Surveyors

Average hotel construction costs

Source: BMT Quantity Surveyors

Average office construction costs

Source: BMT Quantity Surveyors

Average retail construction costs

Source: BMT Quantity Surveyors

The average cost to build a house by state

But average building costs per square metre by cities is just one factor to take into account when working out home building costs.

Because the answer is more complicated than it might seem.

That’s because the location, size, and cost of the block it’s built on and the finishes all affect how much it costs to build a house.

So the cost of building a house in Melbourne would be vastly different from the cost of building a house in Brisbane, or even the cost of building a house in Adelaide, Perth, or Sydney.

To give a rough idea, quantity surveyors RLB has also produced a recent report on the price of a home-build per square metre based on different states, which identifies Brisbane as the most expensive city for home building, with the price ranging from $2,500 to $4,500.

Sydney has a lower start price but a higher range, from $2,100 to $6,400, with Melbourne a more modest $2,000 to $4,300.

Source: Rider Levett Bucknall

Average costs to build a new house by the number of bedrooms

So now we have a vague idea of how much it costs to build a house in Australia depending on the cost per metre square, location, size of the block, and even the fittings.

But what about the size?

It’s all well and good to get a ‘per square metre’ indication of price – but how do you translate that into actual costs, to give you an understanding of how much you’re going to pay to construct your new home or investment property?

There’s no point in going to the bank and saying, “I need to borrow $1,190 per square metre”.

They’re going to need a little more info to go on than that!

Builders and architects often use a per square metre (m2) figure to cost a project so this is a good baseline to work from, according to a page cost guide.

The average cost to build a 3-bedroom house

To build a 3-bedroom house you can expect to pay in the region of:

• $1,300 per square metre for a 3-bedroom weatherboard house on a level block, using budget materials
• $1,600 – $1,900 per square metre for a 3 bedroom full brick single level project home, on a level block, using mid-range to high-end materials and finishes

The average cost to build a 4-bedroom house

To build a 4-bedroom house you can expect to pay in the region of:

• $1,900 per square metre for a 4 bedroom single level, brick veneer home on a level block, using budget materials
• $2,400 per square metre for a 4 bedroom brick veneer single-level project home on a level block using mid-range finishes
• $2,900 per square metre for a 4 bedroom full brick two-level home on a level block using top-quality finishes
• $3,900+ per square metre for an architect-designed 4 bedroom full brick, two-level home on a level block using top-quality finishes

The average cost to build a 5-bedroom house or second-story

To build a 5-bedroom house you can expect to pay upwards of $4,300 per square metre.

If you want to know how much a second-story extension costs, expect to be charged anywhere from $1,850 to $3,300 per square metre, depending on the quality and price of the construction materials and inclusions.

So how much can you expect to pay?

First up, the figures I’ve detailed above are just a rough guide, as building costs can vary significantly based on your location, the project design, and the level of the fit-out.

And remember, a builder’s advertised base price is generally only a starting point and does not reflect how much your home will actually cost when it’s 100% completed.

This is because these “starting from” prices usually only include the basics.

If you are looking for a complete price that includes everything from the carpeting through to the landscaping and driveways as well as the white picket fence at the front, then you need to shop around for what’s known as a “turn-key” package – which means all you need to do at the end is turn the key and step inside.

And then there is the added recalculation needed depending on where the property is located, its size, and the quality of finishes.

It’s not as simple as getting one price quote – the cost of building a house varies widely depending on where and what you’re planning to build.

And this is even more so the case in today’s market where the cost of materials is consistently and steadily increasing, almost by the day.

Thanks to Australia’s rising inflation, almost every category of building materials has become more expensive.

For example, prices of steel products surged 42.1% in the year ending March 2022, according to ABS figures.

But then they fell (-1.8%), driven by reinforcing steel (-2.7%), in the third quarter of 2023 due to easing demand from China and reduced demand for new house construction.

And that doesn’t take into account the level of inflation and subsequent price increases which have occurred since March up until today.

The lesson is that prices are volatile.

And then the cost of an architecturally designed home to one built by a volume builder would differ again.

But to give a very rough idea, according to ABS data, the cost of building a house in February last year was $449,436, slightly up from the previous month’s $445,664.

In February 2022, it was $391,937 while in February 2021, it stood at $319,261.

The hidden costs of building a house

As mentioned earlier, there are a number of costs that come into play when building a house.

For a standard brick home without any custom finishes, you may be able to come up with a fairly clear budget.

However, once you start factoring in extras such as landscaping, driveways, retaining walls, fences, upgrades, finishes, and fittings, your costs can increase significantly.

We already know that the breakdown of the costs to build a house would differ depending on the size of the property, location, and finishes, but what about the hidden costs of building a house?

Here are a few costs you might have overlooked.

1. Site costs

These are the expenses that are incurred to prepare your block of land before construction can even commence.

These are usually completed by your builder and in most cases, the site costs are charged on top of the build price.

Some of the typical expenses involved in a site cost can be:

• Connections to services such as water, sewer, electricity, and gas
• Fences
• Retaining walls
• Site clearance (trees, roots, bushes)
• Site survey
• Soil tests

According to the Urban Development Institute of Australia’s (UDIA) 2023 State of the Land report, despite the drop off in new land sales activity the national median lot price rose by 20% to reach $391,546 in 2022, with all capitals except for Perth recording double-digit median price growth.

The report reveals that the most expensive greenfield market, Sydney, recorded an eye-watering 31% increase in median pricing in 2022, finishing with a year-end lot price of $716,381, driven by a spike in the June and September quarter pricing profile.

The ACT recorded a record-breaking 38% lift in the median lot price, to bring the Nation’s Capital to $622,863 and further entrench Canberra as the second least affordable greenfield market in the country.

The high-volume Melbourne market recorded a 17% annual increase in median lot pricing to finish the year at $382,125, 12% higher than the previous peak median land price in 2018.

South-east QLD recorded a 26% annual price uplift to $357,717 which positions the important greenfield market as 50% cheaper than Sydney but is now only 6% cheaper than Melbourne.

The hitherto affordability advantage SEQ held over Melbourne has continued to close since 2018 when there was a 22% pricing differential between the two markets.

Adelaide recorded the greatest single yearly price growth result in a decade with the median lot price escalating by 25% in 2022 to $234,500, meaning the city is now the second-most affordable nationwide.

With Perth’s median lot pricing only growing a moderate 6% in 2022 to $227,750 it has taken over the mantle of Australia’s most affordable capital city greenfield market – the first time it has held this title in over a decade.

2. Other factors that can affect the build price

Once you have signed a contract with a builder and decided on the layout and design of your property, they will make plans and prepare documents, before arranging a ‘pre-start meeting’.

The pre-start meeting is at the stage at which your house plans are finalised.

They are approved by the council and you are ready to make your final choices in regards to all of the design aspects, such as wall colours, the types of light fittings, and the materials used on the roof and on floors.

The ‘prime costs’ are generally already in place by the builder, however, keep in mind that in base contract packages, the prices factored in often account for the cheapest materials, the most basic fittings, and the most standard fixtures.

If you wish to change any of these, you could incur an extra cost.

Some of the parts of the home that you may wish to ‘upgrade’ during this process include:

• Roof: Depending on the materials you choose for your roofs, such as tiles or colorbond, this can vary widely
• Tiling: An allowance for a tiling amount per sqm will be made, but this can change depending on the quality and size of your final choice.
• Fixtures and fittings: Fancy, nonstandard taps, and European appliances will obviously cost more than standard Australian-made fixtures and fittings. Additionally, labour costs may increase if you select items that are more complicated to install. Inclusions such as fully ducted air conditioning can cost up to $10,000 (more for a two-storey home).
• Kitchen: If you’ve ever shopped for a kitchen benchtop, you know how widely the costs of a kitchen upgrade can vary. Again, the final price will depend on the quality of the item you choose and what is in your initial specification in the contract.
• Electrical: If you decide to change your lighting layout from what has been initially drawn, this can add costs. For example, if the specifications in your contract allow for one standard light per room but you wish to have multiple downlights, this extra cost can add up.

3. Extra costs you should allow for

Some extra costs you need to take into account and which could end up costing you a significant amount of money include:

• Soil quality: One of the first things your engineers will organise is a soil test. They do this by drilling some boreholes and the best classification you can get is M classification soil. If your soil is more difficult to work with eg. Clay, Sand or Rock then you’re likely to have to pay extra.
• The slope of the block: The easiest site to build on is a flat block. If your block slopes you’re likely to have to pay extra for more foundations or to cut and fill the site (make it flat) and possibly for retaining walls.
• Flood-prone areas: some sites require the house to be raised with the floor level above natural ground level to cope with excessive rain or floods and this can add to the construction cost.

Learning the lingo

When you go through the process of building a home, you’ll come across plenty of industry jargon that can be tricky to understand – and even trickier to price.

Here are a couple of terms that may be included in your building contract, which are important to understand:

Provisional sums

A provisional sum is an estimated amount of money that is determined by the builder, according to how much they believe the relevant job or material will cost.

Often the builder can’t put a fixed cost on certain parts of the job at the time of providing a quote or signing the building contract because of unknowns.

For example, while your site may look flat and the builder quotes as such when starting the works, they may discover large clumps of rock that need to be removed and levelled prior to the slab being laid.

Or when the builder starts digging your foundations they realise they have to dig down further to hit firm footings, which will eventually require more concrete to be poured.

At times like this, you’ll need to pay an additional sum on top of the initial contract price, as the allowance that had been provided has been exceeded.

Note: It is always a good idea to budget for around 10% of the total build price to allow for fluctuations in provisional sum prices.

Prime costs

A prime cost is an item that is subject to change during the construction of your home.

These include things like fixtures and fittings such as tiles, doors, and taps, as these items may change depending on your final choice.

You’ll find an estimated amount is provided when signing the building contract and then depending on your specification of the finishes during the build, these prime cost items may cost more or less if you elect to change them along the way.

Note: These items generally only change due to your change in preferences, so this could be an opportunity to trim costs if you opt for basic or standard fixtures, fittings, and finishes.

How long does it take to build a home in 2024?

It’s not just prices that have shot up since the COVID-19 pandemic began, the time to complete construction has also blown out.

A renovation that would have previously taken 4 months is now taking 6-8 months, and a new build that would have been 6-8 months is taking more like 12-18 months.

That’s really putting additional pressure on both builders who need the cash flow and the consumers who might be paying rent on one home while the building takes place for another, or who have two mortgages.

Unfortunately, a number of building companies have folded, having signed fixed-price contracts earlier in the pandemic and not being able to complete their contracts.

The problem is that when it comes to the question of ‘how long’, there are just too many variables.

And currently, there are ongoing construction delays associated with COVID-19, only adding to the time taken to build a house.

Then, there are the unforeseen hurdles that always seem to arise when building – things like unfavourable soil conditions such as rock removal, bad weather (of which there has been a lot this year, particularly in NSW and QLD), or waiting for certain permits or approvals.

Having said all of that, the average time to build a two-storey house is currently roughly 8-12 months.

Note: While the cost of building a home has clearly increased, the price of purchasing an established home in Australia has also surged.

And there may be more price hikes to come yet.

The average cost of building a house varies due to a range of factors, including size, location, and quality of fixtures and fittings.

While I’ve tried to give you estimates, the final price will depend on whether you chose a display home that the builder has designed with cost efficiency in mind, or a unique home- your own special castle which has never been built before.

About Bryce Yardney
Bryce is a property development specialist, having successfully sourced, project managed and completed hundreds of development projects for Metropole’s clients, helping them create substantial wealth.