A common question when thinking about building a new home is “How much should I invest?”
We all want to make sure that we are not over capitalising on our house and land spending. It’s important to consider the total value our property has to meet the market.
Here are some tips to help you:
Tip #1 Spend at least as much on your building as you have on buying the land.
The maximum you should spend would be double the value of your land. If your land cost you $250,000, then you should spend at least $250,000 on the building.
A $250,000 land cost may support at most a $500,000 spend on the building. The exception would be unusual sites, such as waterfront land or acreage that could support a much higher build cost.
Tip #2 Flat sites
Flat sites offer an efficient and easy build option for most builders.
Tip #3 Sloping sites
Sloping sites are quite a different category to flat sites. A sloping site is a site that has more than a 3m fall or slope. In general, building on a sloping site will cost about 25% more than building a similar size home on a flat site. Why is this?
A sloping site requires additional foundations to cater for the slope of the ground. A large part of the additional 25% building cost is buried in the ground in the form of retaining walls and footings. There is also a need for extensive scaffolding to give the builders safe access for construction. Scaffolding alone could cost in the order of $20,000 for a building project. You may have bought that sloping site at a good price, but bear in mind the additional build costs required.
So, how much should I spend?
Spend at least as much as your site cost (as for flat sites), and add an additional 25% to get the same size house as on a flat site.
If your land cost you $250,000, then you can spend at least $300,000 on the build cost.
The maximum you should spend depends on the site. The site may have magnificent views, but very difficult access. This could increase the build cost by more than 50%. Provided the building takes advantage of the views, then the total value of the property could sustain the additional cost to build.
And if it’s all too much contact us and let us help you with your building project.