When starting on their journey on building their first home, it is very common that most people’s first line of enquiry is to call a contractor and ask for a cost ‘per square metre’ price. This, they feel, will give them a clear indication of what the total cost of the house build will be and whether the contractor offers value for money or not.
They then take the lowest price per square metre (psqm), to heart and compare other offers to this and then decide to appoint a company is based on whichever one offers the most competitive price, again, on this basis.
Great, so where’s the problem with that?
The problem is there are many others factors involved in determining the total cost of constructing a building, and you should not use a single cost psqm, but should use a price range instead, ie a ‘low to high price’, and even then you should also accept that this price range can still only give you a very rough indication of the cost, and for the building only the house itself, and not the completed project.
You should thus never use the cost psqm method to determine what the total cost will be, up to the point where you move into your house.
So, what should the contractor include in his initial quotation?
Firstly, a contractor should first offer you a range of costs with a general description of what the standards are from low to high. You also have to know what is included in those amounts and what is not.
To help you, here are some questions you should ask the contractor to clarify with you further in what their estimate includes.
How do you calculate the area of the house?
In most cases, the total covered area is usually measured up to the outside face of the walls, and this will be used to calculate the total area of a project. Not only does this cover all of the habitable rooms it is also common that this includes the covered external elements such as garages, covered verandas and porches, as well.
You should not that the cost to build these external elements is not the same as the cost of the main house, for example, a covered veranda does not have any walls or windows. Thus, if they do include these areas within the same price, you need them to clarify the reason in more detail.
Will all foundation and ground costs be included in your price?
Every building plot is different and thus it is impossible to include all possible factors in a single price.
If the plot is sloping or the soil quality is very poor, there will be additional costs in preparing the ground that your house will be built on. If retaining walls are also needed to level a sloping plot, the additional costs can be quite high. Without a full ground survey, these costs cannot be estimated at the outset and thus it is unusual to find a price that includes all of these potential extra costs.
If these costs are not included, you have to ask the contractor to estimate these as well before making your final decision.
Does your price include any design I want?
No two designs cost the same to build. To compare the relative costs of, say, a 150 sqm house in terms of its design, a single storey house usually costs more to build than a two-storey house and one with a flat roof is normally cheaper to build than one with a sloped roof.
In addition to this, more complex designs with many corners and architectural features will always be more expensive to build than a simple shaped building. The ceiling height is also a factor as also is the overall shape of the house, for ex: long, thin and L shaped designs cost more than a simple rectangular floor plan.
Thus, check what the cost includes, check if there are any restrictions and ask what the any additional costs will be if you want something that is different.
Can I have any finish and specification I want?
If a single price psqm is given, then this will normally include a design with a specific level of finishes and fittings. In these cases, you should also be given a breakdown of the material costs and finishes that are included, and sometimes approximate quantities as well.
You must check that you understand the quality of these materials and how it compares to any promotional material and images you might have been given by them as examples. You will need to ask the contractor what the additional cost would be if you want something different to the items in their specification list and if there will be any cost penalties if you supply your own elements.
Are the architects, engineers, licence fees and other non-building expenses also included in your price?
Sometimes a price will include all of these costs, often up to a limit and may only include very basic services. If you are expecting to have a detailed custom design, with full 3D renderings of your house, perhaps detailed workups of the interior and external design, and maybe full on-site supervision to help you with your choices, then doublecheck whether these services are included or not.
Licences costs are often not included and these can be substantial depending on the location of the plot. You will also need to pay for connecting electricity and water to your house, with some districts also requesting large deposits to be paid to them for pavement protection.
Does your price also include all the external areas?
With external works, no two elements cost the same to build. The cost to build a driveway is not the same as the cost to build a perimeter wall, a pergola, garden gates or steps. You may also be required to build a pavement in front of your house if once has not been already built there.
Including all these elements into a total cost psqm is thus not very easy so often this part of the cost is often left out of the price by the contractor.
Some companies might have a price on a cost psqm basis for external works, that will be different to the one for the house, and they will probably use the total area of the plot to calculate this, but you have to check exactly what this includes. If you have a large plot, the resulting price will be quite a high amount and thus this calculation method is often not applicable.
Does this price include VAT?
In the construction industry, most prices are quoted without VAT. This is also the case if you speak to subcontractors and suppliers for materials and fittings, they usually add the VAT after the unit rate has been agreed.
Some people are eligible to build the first 200 sqm of their house with the VAT rated at only 5%, so their VAT costs are going to be less than someone who does not qualify for this scheme and has to pay the normal rate.
So, as the contractors see this as a variable cost, it is likely the price you have from them will be without VAT and thus you will also need to factor the VAT into your costs accordingly.
So how much will my project actually cost?
We hope you now can see, that using a cost psqm basis is not ideal after all, to give you even an approximate indication on how much the total cost will be to build your house. We also appreciate that as you are not a construction professional, it will be difficult for you to also work out all these additional elements by yourself!
What you should be doing in evaluating the results of your research is to go back to the contractors and ask them if all the above items are or are not included, and if not, then request an estimate for these items as well.
Sometimes, they will respond saying that they cannot calculate these items, or that this is an indication that the quote is not the total price, or they even may say that these are small details and suggest that they sort these out with you later on.
If you receive any of these responses, you will now have a better idea if you want to continue with them or not.
A professional and experienced company will be able to help you. They will sit down with you, ask you to give them all of the relevant information, ask many questions, do their own assessment and then be able to give you a considered, itemised breakdown of all of the main elements and describe to you what the possible total costs are likely to be.
With a detailed calculation, the result is probably going to be higher than the previous estimates that you might have that used only a single cost psqm method, but at least you are going to be closer to the reality and thus you will be in a better position to make early decisions on how to allocate your budget and available funds accordingly.
As a result, with a clear and understood total build cost at the beginning, you will have a more successful and a better total experience for you and everyone else involved with building your home.