The cost of building a home in Australia

It's no secret the cost of building a home in Australia has surged in the years since the pandemic with supply and labour shortages continuing to weigh on the market.

The troubles plaguing the building and construction industry are well documented, including insolvencies, increased delays, and falling building approvals, all amid rampant demand for housing.

But for some people, building their own home is a long-held dream. So, how much can you reasonably expect to pay for a newly built home in Australia and how can you save yourself some money?

How much does it cost to build a house?

There is no simple answer to this. The cost of building a house in Australia is an incredibly broad and complex equation, with myriad factors contributing to the final cost. The oft-quoted and perhaps easiest way to break it down is by cost per square metre (sqm).

According to global construction and property company Rider Levett Bucknall, the average cost of building a house in Australia in 2024 is between $2,020 to $4,300 per sqm. Based on the average cost of building a 214 sqm home in each state and territory, the national average cost is about $432,000 - $926,000.

As you can see, it's a wide range but homes are not standard, and the costs of building them are difficult to compare. That said, below is the company's breakdown of average home building costs in each Australian state and territory in 2024.

State/Territory	Cost range per floor area ($/m2)	Average cost of a 214 sqm house ($/m2)
South Australia	(Adelaide) $1,740 - $3,800	$375,000 - $815,000
Queensland	(Brisbane) $2,500 - $4,500 (Gold Coast) $1,600 - $4,400	$535,000 - $965,000 $340,000 - $940,000
Australian Capital Territory	(Canberra) $1,840 - $3,650	$395,000 - $780,000
Northern Territory	(Darwin) $1,900 - $2,950	$405,000 - $630,000
Victoria	(Melbourne) $2,000 - $4,300	$430,000 - $920,000
Western Australia	(Perth) $2,200 - $4,100	$470,000 - $880,000
New South Wales	(Sydney) $2,100 -$6,400	$450,000 - $1,373,000

Source: Australia Riders Digest 2024

Bear in mind, these figures are a general estimate. Final costs can vary greatly depending on the location, size, design, quality of materials used, local market conditions, and labour costs, as we'll explore in more depth later on.

Why build a home over buying one?

Building or buying a home is a common and sometimes difficult dilemma for many prospective homeowners. Buying means skipping the waiting period of your home being built, while building allows you to configure the property exactly how you'd like it. But there are other advantages to building as well. Let's consider a few.

First Home Owners Grants

For first home buyers, a big plus in building a home can be a nice little handout from state and territory governments (except the Australian Capital Territory) in the form of First Home Owner Grants. These are generally offered to eligible first home owners who choose to build and are not available to those who buy established homes.

Check the eligibility and conditions for each state, as outlined below:

• First Home Owner Grant - New South Wales

• First Home Owner Grant - Victoria

• First Home Owner Grant - Queensland

• First Home Owner Grant - South Australia

• First Home Owner Grant - Western Australia

• First Home Owner Grant - Tasmania

• First Home Owner Grant - Northern Territory

Avoiding stamp duty

Another advantage in building is it can come with significant savings in stamp duty.

Stamp duty, also known as transfer or conveyance duty, is essentially a hefty charge levied by state and territory governments whenever a person purchases a property. When you build a new home, you don't pay stamp duty on the house, only the purchase of the land which is generally far lower than for the cost of an established home.

Founder of Build in Oz and creator of the Building Home Masterclass Series Natalie Stevens told Savings.com.au avoiding stamp duty is a huge incentive to build.

"Paying stamp duty on an existing home can put you in a negative equity position from the start whereas when you build, the opposite can be true," she said.

Possibility of instant equity

In some cases, building a home can create an asset that may be worth more than the cost of building it right from the outset. But it doesn't always work out that way.

Nonetheless, Ms Stevens said it's a huge financial incentive, even though you have to play your cards right to achieve it.

"Depending on your requirements, there are certain rules you can follow to create instant equity through choosing to build," Ms Stevens said.

She warned it takes discipline and making decisions with your head, rather than your heart, but this can be difficult when you're creating your future home.

No maintenance costs for some years

It's estimated building a new home can save you at least five years of maintenance costs. This can allow you direct extra cash to paying off your home loan that buyers of established properties may not be able to do.

Prioritising your spending

Building your own home allows you to allocate your funds to the areas that mean the most to you. You can choose to lash out and rein in according to what's important to you and your family whether that's a bigger backyard, a generous living space, a gourmet kitchen, or a lavish master bedroom.

"Most people buying an existing home make concessions. Building means having everything just as you want it," Ms Stevens said.

What to consider prior to building

Contrary to popular belief, building a home shouldn't start with making contact with a builder. You first need to get your financials in order, so you've got a clear idea of what you'll be up for and what to expect in the journey ahead.

Speak to a financial adviser first

Managing Director of Penfold Property Group Marc Wilkinson said the first step new home buyers should take prior to building is to seek financial advice.

"Speak with a financial adviser first to determine your realistic budget and potential financial, legal, and tax commitments," Mr Wilkinson told Savings.com.au.

"They can also point you to the appropriate lender, as each has completely different lending policies, some of which may not be suitable for you.

"Financial advisers are also very skilled at rearranging your debt and strategising your interest costs."

Ms Stevens echoed Mr Wilkinson's sentiments, saying it's important to get unbiased advice about the process of building a home.

"It's vital that you educate yourself on the process of planning to build so that you're not relying solely on the advice of builders and real estate agents who are shaping their advice on what maximises profit for them rather than savings for you," she said.

"You need to be aware that often salespeople will only tell you what they want you to know and if you're not asking the right questions then you're leaving yourself open to regrets."

Define your budget

When you're looking to buy an established home, many prospective buyers can fall in love with a property. The prospect they could lose the home to other buyers can sometimes drive them to make offers that far exceed their budget and means.

But the sentimental grapple can be even more acute when you're building your own home, given the personal involvement in the creative, hands-on process of designing and fitting out where you're going to live. Defining a budget prior to any plans being draw up is absolutely vital to keep costs at the level you can afford.

Your budget needs to be the constant touchstone during the design, building, and fitting out process. It should be used as the basis of the decision-making you'll encounter along the way (although that can sometimes be easier said than done).

Buy the best land you can

As we'll explore in more depth later, the land you purchase is a key factor. Mr Wilkinson said considering the location and size of the block should be just as important as any decisions made on the home that will be built there.

"You should look to purchase land in the most desirable location that you can. This means the best position for your transportation to work, access to schools and lifestyle amenities which will be close to home," he said.

"The real value in your property is in the land, and be it a small home or large home, there will be more buyers when you come to sell if the position of the land is in the best position you can afford."

You won't live there forever

As with almost all property bought or built, the chances of you spending your entire life there are quite slim. The average length of living in an owned house in Australia is currently around nine years (up from seven years over the past decade).

Mr Wilkinson said this should factor into your decisions prior to building, so as to avoid getting carried away, both mentally and financially.

"The majority of mortgages change every five to seven years, meaning before your children reach teenagehood, you'll likely be looking to update or expand to a new home," he said.

"Your first or second home probably won't be your dream/end goal home."

What are some of the factors that affect the cost of building a house?

As we've already covered, the cost of building a house varies widely, so let's take a closer look at what drives such variations.

Land and location

At the risk of overstating, the land purchased is just as important as the home you build on it. The old real estate adage certainly applies here: location, location, location. Put simply, buy the best located block you can afford. It will be a major factor in the future valuation of your property.

The Urban Development Institute of Australia's (UDIA) 2024 State of the Land Report found land prices per square metre increased in all capital city markets across 2023. The combined capital city land price increased 5% to $1,030 per square metre, the first time the reading has surpassed the $1,000 mark.

Here's a rundown of the cities covered by the report:

• Greater Adelaide recorded the strongest lift in land pricing, growing by 14% to reach $608 per sqm, but remains the most affordable capital city to purchase land using this metric

• Greater Perth lifted 7.7% to reach $654 per sqm

• Greater Sydney remains the most expensive land market with a median price of $1,505 per sqm

• The ACT is the second most expensive place to buy land with annual growth of 6.5% to reach $1,409 per sqm

• South-East Queensland recorded annual land price growth of 3% to $889 per sqm

• Greater Melbourne also recorded 3% growth to $1,116 per sqm

The graph below charts the rise of land prices in most of Australia's capital city markets over the past decade or so.

Australian Median Land Price ($/sqm)

Source: UDIA: Research

There are a few general factors that can lift the value of a parcel of land. For example, proximity to a CBD, waterfront, or hospital is generally good for land values. Similarly, values can be depressed by such things as poor access to infrastructure or land size or shape that makes the block less desirable.

It's also worth bearing in mind that most land is generally not ready to accommodate a home as is. Generally, newly bought land has to be contoured to reduce the slope of the surface, requiring earthworks and/or retaining.

The cost to level an average block in Australia sits between $14,000 to $20,000 depending on the lot's size, terrain, the degree of the slope, and whether a retaining wall is required.

Size

As a general rule, the bigger the home you are looking to build, the more it's going to cost. This applies to the sqm size of the dwelling as well as the number of storeys.

Adding an extra level will significantly hike building costs as it will require extra features such as stairs and also scaffolding while it's being built. Of course, the bigger the home, the more you're up for in materials and labour as well.

Quality and materials

The type and quality of materials used to build your property have a huge influence on its final price. Different materials generally won't mean much to the average Joe but in construction terms, a timber frame is typically the cheapest option, brick veneer a median price point, and double skin brick the most expensive option.

It will come as no surprise that materials are not all created equal. That goes for interior fittings as well. Their quality is a big factor that will affect the end cost of your home. Some you may choose to scrimp on and others you may go all out.

Bear in mind though, while using higher quality materials will be more expensive, it can also lessen the chance of requiring maintenance further down the line and may also improve the value of the property.

But beware of overcapitalising. This only really becomes an issue when you go to sell your property one day. It's wise to keep future resale value in mind when you're making decisions - even if you plan to stay in your home for some years.

Trades

Unless you're applying to be on 'The Block', chances are you won't be building your own home - you'll need professionals to do it for you. Choosing your builder is an important part of the home-building process to ensure your build goes smoothly. A rule of thumb: it's better to go with someone reliable who may be more expensive than a cheap and dodgy operator.

Ensure your builder is appropriately qualified, registered, licensed, and insured and also ask for their experience in similar projects to yours so you can see the evidence of their work. You'll also need plumbers, electricians, painters, tilers, plasterers - and likely many more. A good builder can have this all under control if you draw up your contract that way and can also run the process for you.

Timeframes

Your builder will typically give you an estimated time of completion for your build. In some cases, you can ask for this to be shortened but, of course, this will come at a cost.

Alas, builds are often delayed. This can be due to many reasons including bad weather, supply and labour shortages, or disorganised builders and tradespeople. This will generally also increase your costs, so make sure you're prepared for things not quite going to plan.

Hidden costs of building a house

Soil

Mr Wilkinson says there a number of costs that people often aren't aware of. Take soil, for example.

If the land needs soil added or removed to ensure a steady foundation, this can be a significant extra cost. Soil testing needs to be carried out before building begins, costing between $250-$400, but you'll be up for significantly more if the test shows more soil needs to be added, or taken away.

This can sometimes take place with levelling works, although may need to be done separately depending on what condition you purchase your land in.

Bushfire compliance

For people building homes near bushland, bushfire protection is mandatory. A bushfire attack level (BAL) is a means of measuring the severity of a building's potential exposure to fire. It also dictates the construction methods and materials you'll need to use to build in bushfire prone areas.

The higher the bushfire rating of the site, the higher the extra costs associated with your build.

The lowest risk BAL 12.5 can put another $3,000-$5,000 on top of a standard build while complying with BAL 29 requirements (with increased levels of ember attack and heat exposure) can add up to $13,000-plus.

Meeting the highest risk requirements in a possible flame zone can top an extra $50,000 in building costs.

Flood compliance (and more)

Extra costs also apply to those building in flood zones as homes must be built to specific guidelines to give them some protection in future flood events.

These compliance requirements are imposed by state and/or local governments. Of course, it's best to check the status of your block before you buy it.

Here's a list of other hidden costs you may need to factor into your budget:

• Council-specific building conditions

• Developer covenant conditions (if applicable)

• Rock removal

• Connection costs, e.g. NBN installation, energy services

• Permits

• Inspection fees

• Moving expenses

• Landscaping

Finance for building a home

If you're not sure how you're going to finance your build, then you will likely be looking at getting a loan. But how do you get a home loan for a property that hasn't been built yet? That's where construction loans come in.

A construction loan is a specific type of home loan designed to help fund the building of a new home. Most construction loans typically charge interest-only repayments for the duration of the build, which is usually set at 12 months. Lenders can also parcel your loan into stages based on what part of the building process is occurring, a method known as progressive draw-down or progress payments.

Construction loans can be complex, so we won't get too bogged down with them here, but you can read our guide to constructions loans if you wish to learn more. Generally speaking, you won't be able to get a normal home loan on a home that hasn't been built yet, largely because the lender won't be able to conduct a proper property valuation.

Energy-efficient tips to build and save money

There are many features you can install into a newly built home that can save you money on an ongoing basis. For some of them, you may have to outlay some extra cash at the start to make long-term savings. Here are a few tips to save you in the long run:

Orientation

Before the foundation is even poured, positioning your home to take better advantage of sun and shade throughout the year can save you a hefty sum in energy costs over the years you live there. This needs to be done in the design phase so make sure this is being taken into consideration when your building plans are getting drawn up.

Generally speaking, your living areas and rooms where you spend the most time should be located to the north to catch the most sun and light for the longest part of the day. Position rooms where you'll be spending less time, such as toilets, laundries, and spare rooms, to the south.

Insulation

You won't be able to see it, but insulation will make a huge difference to the energy efficiency of your home. Approximately one-third of the cost of heating your home is lost through walls and ceilings. Insulation is a win-win for all seasons as it also acts to keep heat out in summer.

Ask your builder about the materials used to insulate walls, ceilings, and floors. It will be money well spent.

Solar

Water heating is the second largest segment of household energy use, ranging from 15-30% of an average power bill. It's also the largest source of greenhouse gas emissions from an average Australian home.

While not the cheapest option to install, solar hot water systems are becoming more common in Australian households with some builders offering solar-powered hot water systems as a standard inclusion and federal and state governments offering solar rebates.

Households with solar can expect to save around $1,000 to $2,000 on their annual energy bill so with a rebate thrown in, it won't take too long to recoup the cost of installing one.

Lighting

Lighting costs have plunged significantly in recent years thanks to the popular uptake of light-emitting diodes (LEDs) in many Australian homes. Lighting now accounts for around 10% of the average household electricity budget, according to the federal government's energy.gov.au energy saving initiative.

LEDs use about 75% less energy than traditional halogen light bulbs and last between five to 10 times longer. The upfront cost of LEDs generally has a payback time of less than a year.

Alternatively, it's estimated switching five 50w halogen downlights for two 15w compact fluorescent lightbulbs (CFLs) could save up to $140 per year on a power bill.

Heating and cooling

Depending on where you live, heating and cooling can account for anywhere between 20-50% of a typical household's energy use.

There are many options in this space and a bit of research will be required for what will suit best your climate and conditions. The federal government's energy.gov.au site provides some alternatives as well as the general advice to consider a system's energy rating no matter what system you opt for.

If you're going for reverse-cycle air conditioning, opt for a zoned system that can heat or cool only the areas you're using, or going to be using, rather than the whole home. The best heating and cooling system should be the right-sized system for your home, saving you energy and money. Buying a system that is too large or small will mean you're using energy unnecessarily which will cost you in the long run.

Windows and doors

When you build from scratch, double- or triple-glazed windows and doors can significantly contribute to the energy efficiency standards of new builds.

Double glazing also boosts your home's heat-retaining qualities in winter and keeps the heat out in summer, reducing reliance on heating and cooling systems to maintain a comfortable temperature inside your home.

The cost of double-glazed windows in Australia is typically 30-40% higher than for single-glazed equivalents so again, it will mean a bigger upfront expense to achieve longer-term savings.

Laundry

Perhaps the easiest tip of the lot is to install a washing line instead of having to use a clothes dryer. Even something as simple as this can save you around $80 per year.

Savings.com.au's two cents

Building a house is not a decision that should be taken lightly. Even with the best laid plans and disciplined budgeting, it can be very difficult to guarantee the final cost of building a home. There are myriad issues that can arise and unexpected costs that can blow out your final bill.

A clear budget and a disciplined approach are vital in keeping your spending to plan. Sometimes you may need to spend more on the 'boring' stuff: insulation, appliances, windows, etc. to save yourself money in the long term. Don't lose sight of the bigger picture.

Although it will be your home, it may not be your home forever so try to think about what will best add value to the property if it gets put on the market at some future date. It can pay to keep that in mind when you're making the many decisions that you'll have to make along the way.

Building your own home can ultimately be a rewarding experience but many people who've taken the journey will tell you it's not always smooth sailing to get there.

^{Article first published by Alex Brewster, June 2021. Last updated July 2024.} 

^{Photo by Jens Behrmann on Unsplash}

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