Many people dream of building a home and creating a place designed exactly how they want it. But the price tag often extends beyond what’s laid out in the initial quote. From local council fees to site prep and even some unexpected add-ons that creep in along the way, there are many hidden costs involved in building a new home and being aware of what they are is super important.
That’s what we’re going to be looking at today. Below, you’ll find information on the most commonly overlooked expenses, helping you budget for your house build smartly and keep those costly surprises to a minimum!
Table of Contents
Site Costs
When you think about “site costs”, you might imagine something as simple as clearing a patch of land. But there’s a lot more that goes into preparing your block for building, and if you’re on sloping land, have rocky soil, or are in a flood prone area, these costs can climb fast! First of all, you’ll likely need a soil test and contour survey. These tests confirm if your block is stable enough for construction and help your builder figure out how much extra work is needed to make the site level and secure.
The site costs don’t necessarily end there, though. In some cases, you may need to install retaining walls or upgrade drainage systems, especially if your block has slopes or is in tricky terrain. Also, if your block is near a national park or other protected area, local councils may require specific site protection measures, which can add to your budget. Even site requirements like temporary fencing, toilets, or parking spaces for trucks can rack up extra costs.
Council Fees & Approval Costs
Before a single brick is laid, there’s a lineup of council approval fees that need to be addressed. Councils charge for various permits, and these costs also vary depending on your location, so you’ll need to budget for a construction certificate and any other planning permits needed in your area. Also, if your block falls under specific estate covenants or environmental protections, there might be extra steps (and costs) to get these approvals over the line.
Building Sustainability Index
Another factor to keep in mind is compliance with the Building Sustainability Index (BASIX), which mandates energy and water efficiency measures. And, while these features add long-term value to your new home, they can certainly push up your initial build costs if you need upgrades like double glazing or solar panels to meet requirements.
Provisional Sums and Prime Costs
Your building contract will include two terms you might not have heard of before – “provisional sums” and “prime costs”. These are essentially placeholders for things that haven’t been finalised, like specific fixtures of finishes. For example, if you haven’t chosen your bathroom tiles, the builder will list an estimated cost in your contract. However, if you later decide on something different or pricier, the extra cost will come out of your pocket.
To put it simply, prime costs are for specific items you’ll choose, while provisional sums are more general estimates for work that might be harder to predict. However, both of these can incur extra costs if not carefully managed, so it’s best to try and lock in as many choices and understand the allowances to keep your expenses in check.
Labour Costs & Rising Material Costs
Perhaps unsurprisingly, labour and materials are the core costs of any home build, but even here, there’s scope for a hidden expense to pop up. For instance, labour costs might increase if the project takes longer than anticipated or if your site requires additional workers for specialised building work.
Material prices are similarly unpredictable, especially for imported items. Material costs for items like timber, steel, and concrete regularly fluctuate based on demand, availability, and even global shipping costs, and while a builder will give a rough estimate at the start of the project, those numbers aren’t always locked in. The best thing to do to keep costs as low as possible here is to try and negotiate fixed prices for materials – that should help keep your budget a little more steady.
Electrical & Lighting
Electrical provisions might seem like a pretty small part of your budget compared to other things, but many people find that a basic package doesn’t cover their needs. This is because standard contracts often include a limited number of points and lights, which might not be sufficient for modern homes, especially if you plan on setting up a home office or want outdoor lighting.
Now, while you might think it’s possible to keep your initial costs low by upgrading further down the line once the build is complete, adding extra power points or lights during the building process is actually often much cheaper than doing so after the fact. So, think about your needs and include them in the initial contract to avoid paying extra at a later date.
Landscaping & Driveway Costs
One of the most common hidden costs when building a new home is landscaping. It’s easy to overlook, but things like lawn installation, garden beds, and even basic temporary fencing can set you back quite a bit if you haven’t planned for it in advance. It’s not just plants, though! If your site needs retaining walls to support sloping areas or you’re installing a concrete driveway, the extra costs can be surprisingly high.
Driveways are especially easy to forget about, but you’re going to need somewhere to park once you’ve moved in! Most builders don’t include the driveway in the base price, and getting a concrete or asphalt driveway installed can cost thousands of dollars, so planning for these finishing touches early on will make sure they’re accounted for in your total budget.
Lenders Mortgage Insurance (LMI)
If you’re borrowing a high percentage of your home’s value (usually over 80%), your lender will likely require you to purchase Lenders Mortgage Insurance (LMI). This is basically insurance that protects the lender if you can’t meet your mortgage payments, but it can add thousands to your borrowing costs, which often comes as a big surprise to many first-time homeowners.
One way to avoid LMI is to save a 20% deposit, but if that’s not an option, you’ll have to factor this cost into your budget from the outset. Some lenders do offer an LMI “capitalisation” option, where they’ll add the LMI cost to your mortgage, but keep in mind that this means you’ll be paying interest on it over the life of your loan.
Legal Fees, Land Registration & Asset Protection
The legal fees associated with building a new home are another often overlooked cost. You’re more than likely going to need a solicitor to review your building contract (particularly to help you understand any legal and penalty clauses), and if any disputes arise, legal assistance can quickly become costly. Also, registering the land title with the government and paying local council fees for land use can take a whole load of money from your budget.
Councils may also require “asset protection fees” to ensure that nearby infrastructure isn’t damaged during construction. This is going to be pretty much unavoidable if you’re building a house in an area with narrow streets, steep hills, or neighbouring properties, so do some research on how much these will cost in your area and factor this into your budget.
Stage Payments & Budget Overruns
A building contract usually specifies a payment schedule tiled to the completion of certain construction stages, and these are known as “stage payments”. However, if you don’t have sufficient funds in place to cover these stage payments when they’re due, penalty fees can be added, which will increase the costs. Likewise, budget overruns can occur if changes are made during the construction process (such as upgrading materials or altering existing floor plans), and these can also incur extra costs that go beyond the initial estimates.
To cover any unexpected costs that might arise due to delayed payments or overruns, it’s best to save money beforehand and have a contingency fund of around 10% to 20% of the total cost put aside. This can help absorb the impact of any increases without affecting your ability to complete the project.
Keeping Your Budget on Track
Building a house in Australia can come with a variety of hidden costs that can catch you off guard, from site preparation costs to LMI and everything in between. The best way to keep things under control is by communicating clearly with your builder, planning for the extras, and always keeping a bit of additional funding squirrelled away for the inevitable surprises. After all, when you know what to expect, you’re better positioned to stick to your budget and build a home you’ll love.
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