Forums / Property Investing / Help Needed! / Townhouse construction costs in Melbourne

Viewing 20 posts - 1 through 20 (of 34 total)
  • Profile photo of macemace
    Participant
    @mace
    Join Date: 2012
    Post Count: 4

    Hi All,

    I have spent the past 2 hours trawling through the Forums to see if I can find an answer to my question: 
         "What is an 'accurate' and 'up-to-date' cost per square metre to construct a 200m2, 2-atorey 3 bedroom townhouse of a reasonably good finish in Melbourne"

    But to no avail.

    The answers I have found so far range from around $900/m2 – $1,500/m2 inc GST

    Which is obviously far too big a range.

    E.g. Washington Brown cost calculator http://www.washingtonbrown.com.au/building-cost-calculator/ estimates approx $1,400/m2 inc GST

    BuildChoice cost calculator http://www.buildchoice.com.au/construction_cost_calculator.htm estimates approx $1,350/m2 inc GST

    And BMT cost calculator http://www.bmtqs.com.au/ConstructionCostCalculator.aspx estimates approx $1,350/m2 inc GST

    As well as numerous posts from this forum suggesting between $900 and $1,300

    I built my own 40square house around 5 years ago, but that was obviously quite a different project. This is my first townhouse development, and I am trying to perform a feasibility on a 2 townhouse development in Melbourne, and trying to establish some accurate construction costs. I am looking for a reasonable finish on the project, and not trying to build "on  the cheap"

    Each townhouse is approximately 200m2, and if I take the figures above, that would indicate that construction costs could vary from: $180K – $300K inc GST. Which will obviously have a huge impact on the profit margin.

    I need to narrow this estimate of costs down to a smaller range. I.e. If I could work on $1,000 – $1,200 Inc GST, or $1,200 – $1,300 Inc GST, then that would make me feel a lot more comfortable

    Has anyone recently built townhouses in Melbourne, or knows enough to provide me with an accurate and up to date cost per square metre (Inc GST) to construct a 200m2, 2-atorey 3 bedroom townhouse of a reasonably good finish in Melbourne. Including Landscaping and driveways

    Any thoughts, feedback or comments greatly appreciated.

    P.S. I will probably be engaging in the services of a construction company to develop the townhouses, so the cost I am looking for at the moment is what it will cost me to have someone build them for me.

    P.S.S. I assume I could save around 20% on a builders margin if managed the project myself – which is definitely an option.

    Thanx heaps
    Tony

    Profile photo of Stacey SurveyingStacey Surveying
    Participant
    @stacey-surveying
    Join Date: 2011
    Post Count: 138

    Hi Tony,

    Not really giving you a direct answer to your query here, but I think the general consensus on all the property forums is that the big builders (those all-in-one packages) are screaming bad news and headaches.

    You’d be best getting a project manager, or like you said handle the project yourself if you’ve got a bit of spare time.

    If you want I can PM you the details of my architect who can give you a good idea of costs involved in the building process? Also I’ve done a bit of work for a developer in Melbourne CBD who does apartment and townhouse projects with a fantastic end product, so I can ask him who he uses also.

    Cheers,
    Ashley

    Profile photo of AALLIIAALLII
    Participant
    @aallii
    Join Date: 2012
    Post Count: 37
    mace wrote:
    Hi All,

    I have spent the past 2 hours trawling through the Forums to see if I can find an answer to my question: 
         "What is an 'accurate' and 'up-to-date' cost per square metre to construct a 200m2, 2-atorey 3 bedroom townhouse of a reasonably good finish in Melbourne"

    But to no avail.

    The answers I have found so far range from around $900/m2 – $1,500/m2 inc GST

    Which is obviously far too big a range.

    E.g. Washington Brown cost calculator http://www.washingtonbrown.com.au/building-cost-calculator/ estimates approx $1,400/m2 inc GST

    BuildChoice cost calculator http://www.buildchoice.com.au/construction_cost_calculator.htm estimates approx $1,350/m2 inc GST

    And BMT cost calculator http://www.bmtqs.com.au/ConstructionCostCalculator.aspx estimates approx $1,350/m2 inc GST

    As well as numerous posts from this forum suggesting between $900 and $1,300

    I built my own 40square house around 5 years ago, but that was obviously quite a different project. This is my first townhouse development, and I am trying to perform a feasibility on a 2 townhouse development in Melbourne, and trying to establish some accurate construction costs. I am looking for a reasonable finish on the project, and not trying to build "on  the cheap"

    Each townhouse is approximately 200m2, and if I take the figures above, that would indicate that construction costs could vary from: $180K – $300K inc GST. Which will obviously have a huge impact on the profit margin.

    I need to narrow this estimate of costs down to a smaller range. I.e. If I could work on $1,000 – $1,200 Inc GST, or $1,200 – $1,300 Inc GST, then that would make me feel a lot more comfortable

    Has anyone recently built townhouses in Melbourne, or knows enough to provide me with an accurate and up to date cost per square metre (Inc GST) to construct a 200m2, 2-atorey 3 bedroom townhouse of a reasonably good finish in Melbourne. Including Landscaping and driveways

    Any thoughts, feedback or comments greatly appreciated.

    P.S. I will probably be engaging in the services of a construction company to develop the townhouses, so the cost I am looking for at the moment is what it will cost me to have someone build them for me.

    P.S.S. I assume I could save around 20% on a builders margin if managed the project myself – which is definitely an option.

    Thanx heaps
    Tony

    Are you sure these prices are including GST? That also makes a big difference if it isnt.
    I'm interested in this information too if a builder or someone recently build in Melbourne can give us some feedback.

    Thanks,

    Profile photo of christianbchristianb
    Participant
    @christianb
    Join Date: 2009
    Post Count: 386

    It is my experience that an allowance of $1,500/m2 (inc. GST) is reasonable.
    To budget anything less is likely to end in heartache.
    And if you choose to save 20% margin by managing the project yourself, expect to earn every cent!

    The profits are generally found in the acquisition of the right property, the design (don't waste m2) and the yield.
    On the final point, if good design will yield 3 compact 3br town-houses, and a poor design yields 2 large 3br town-houses this has a "double double" effect: You will spend more to make less.

    All that said, commendations for having a crack, and all the best with the project.

    Profile photo of AALLIIAALLII
    Participant
    @aallii
    Join Date: 2012
    Post Count: 37

    Thanks Chrstian,

    does that price of approx 1500 inc GST include from start to end, i.e. carpets, all kitchen, painting, landscape, curtains, air cond/heating etc?

    It also seems so expensive when you consider a 21.5 square unit (200sqm) to cost approx 300k to build. I would have thought it would be low 200k.

    What are some ways you know one could potentially save money, i.e. sub-contract painting, landscaping etc so you dont have the builder to be the middle man.

    Any help would be much appreciated.
    thanks,

    Profile photo of christianbchristianb
    Participant
    @christianb
    Join Date: 2009
    Post Count: 386

    Yes, the budget of $1,500 needs to include all elements.

    The reason it seems expensive is that people tend to compare "project" houses with "custom" houses.

    If what you are proposing has not been built before – and this is generally the case with property development, whereby the dwellings must be designed to suit the land available – then it will be more expensive than something that has been done before.

    If a builder builds the same dwelling 30 times, they know every bit that goes into that building. They know (exactly) the materials and labour costs and they have their supply rates at the lowest point. Hit the button and all the suppliers and contractors know what they need to do. Everyone involved accepts a lower margin in return for certainty and continuity.

    Project homes can be built for $1,000/m2 or less on a tight margin, because the builder is more or less certain of that margin.

    One-off buildings, on the other hand, are not so certain. The supply rates for labour and materials will be greater, and the builder will have a fatter margin to cover contingencies.

    Are there ways you can save money?

    1. Design carefully and consult with your builder before final documents are issued. They are generally happy to make some cost saving suggestions.

    2. Don't waste m2. Every m2 built will incur a cost.

    3. As the owner, supply all fittings and fixtures. The owner will have a greater motivation than the builder to scrap and bargain for savings on these items.

    4. Some builders will happily build to "lock-up" stage only. On paper this sounds great, but there is still a lot to be done, and expertise required to get it done.

    5. Do your research and specify according to the market in which you are developing. Timber floors and stone bench tops are lovely, but your prospective tenant may not be willing to pay for them.

    Profile photo of washingtonbrownwashingtonbrown
    Member
    @washingtonbrown
    Join Date: 2006
    Post Count: 44

    I’d suggest Washington Brown is right!!

    Regards

    Tyron Hyde
    Director
    http://www.washingtonbrown.com.au

    Profile photo of AALLIIAALLII
    Participant
    @aallii
    Join Date: 2012
    Post Count: 37

    My father is a painter and obviously we can have the painting done ourselves, and the other areas such as landscape and plumbing and electrical we could organise for subcontractor to do directly by contracting it these things. Just wondering approximaltly how much discount can one obtain by having these things done one-self.
    Also if you engage a builder to do these the entire project, they essentially act as the property development manager? There would be no requirement to obtain a development manager to oversee things. What do you guys think about that. thanks

    Profile photo of jazz77jazz77
    Member
    @jazz77
    Join Date: 2009
    Post Count: 78
    christianb wrote:
    Yes, the budget of $1,500 needs to include all elements.

    The reason it seems expensive is that people tend to compare "project" houses with "custom" houses.

    If what you are proposing has not been built before – and this is generally the case with property development, whereby the dwellings must be designed to suit the land available – then it will be more expensive than something that has been done before.

    If a builder builds the same dwelling 30 times, they know every bit that goes into that building. They know (exactly) the materials and labour costs and they have their supply rates at the lowest point. Hit the button and all the suppliers and contractors know what they need to do. Everyone involved accepts a lower margin in return for certainty and continuity.

    Project homes can be built for $1,000/m2 or less on a tight margin, because the builder is more or less certain of that margin.
    One-off buildings, on the other hand, are not so certain. The supply rates for labour and materials will be greater, and the builder will have a fatter margin to cover contingencies.

    Are there ways you can save money?

    1. Design carefully and consult with your builder before final documents are issued. They are generally happy to make some cost saving suggestions.

    2. Don't waste m2. Every m2 built will incur a cost.

    3. As the owner, supply all fittings and fixtures. The owner will have a greater motivation than the builder to scrap and bargain for savings on these items.

    4. Some builders will happily build to "lock-up" stage only. On paper this sounds great, but there is still a lot to be done, and expertise required to get it done.

    5. Do your research and specify according to the market in which you are developing. Timber floors and stone bench tops are lovely, but your prospective tenant may not be willing to pay for them.

    This is excellent advice!

    I met with a client last night who wants a custom built home but is stuck on the $10,000 per square ($1100sqm) figure . I politely told him that we would both be wasting our time if that is your budget. He took this on board and discussion continued.

    Be very carefull thinking you can save money by doing things yourself, sure it can be done. But dont forget though your time is worth something also.

    Profile photo of macemace
    Participant
    @mace
    Join Date: 2012
    Post Count: 4

    Hi all,

    Thx for the gr8 feedback.

    A couple of comments:
    – In terms of doing things myself, I would either do ALL or NONE. However, I just want to clarify that have actually already project managed 2 housing constructions. one was over 40 square on a sloping block with 5 different floor levels, and 3 different flooring systems (posi-struts, suspended slab and stumps). And I do know that there is a lot of work involved. And yes, you do earn every cent. I also sat a 6 month builders course, but never actually sat the test to become a registered builder. So for me personally, I feel I am quite capable of managing a duplex townhouse development.
    – I liked the fact that Tyron Hyde from Washington Brown suggested that the figures quoted from Washington Brown were correct. Thx Tyron. Brought a little smile to my face.
    – Thanks to Christian B for your comments. A lot of good stuff in there. Really good. Especially about a good design:
    I.e. On the final point, if good design will yield 3 compact 3br town-houses, and a poor design yields 2 large 3br town-houses this has a "double double" effect: You will spend more to make less


    I also just want to clarify that by construction costs, I am not talking about any costs associated up to and including the building permit. E.g. architects fees, engineering drawings, etc. I am talking purely construction costs.

    I guess what I am hearing, is that if you want a reasonable job done, and you are not qualified to do it yourself, or you do have not have the time, then you are going to have to employ the services of a builder. And if this is the case, then you are realistically looking at approx $1,500 per m2 inc GST. And that any talk of getting a builder to build it for $1,100 or $1,200 per m2 is just not going to happen – or, you are asking for trouble

    I do agree with Aallii's comment:
    It also seems so expensive when you consider a 21.5 square unit (200sqm) to cost approx 300k to build. I would have thought it would be low 200k.


    It does seem very high to me as well, but I guess it is what it is.

    One more question for Christian B
    Given that these types of constructions are one-offs, you mentioned that a builder may typically allow a little more fat for contingency. So would you expect them to add a margin more like 25-30% rather than 20%?

    Thx again everyone for the good feedback

     

    Profile photo of AALLIIAALLII
    Participant
    @aallii
    Join Date: 2012
    Post Count: 37

    How much can be negotiated for economies of scale, i.e. building 5/6 units on a block rather then just 2 or 3?

    What percentage could one negotiate for this sort of thing?

    Profile photo of jazz77jazz77
    Member
    @jazz77
    Join Date: 2009
    Post Count: 78

    If you dont have a builders licence you will have to go owner builder.
    You cant do multi unit work as an owner builder anymore.

    Profile photo of macemace
    Participant
    @mace
    Join Date: 2012
    Post Count: 4

    Thx jazz77,

    I was probably gonna get my licence soon anyway.

    But now i know i HAVE to.

    Which i think is a step in the right direction as far as the law is concerned

    Profile photo of AALLIIAALLII
    Participant
    @aallii
    Join Date: 2012
    Post Count: 37

    I thought a builders licence was only required for the heavy work, whereas things such as painting, landscaping, tiling etc was not required by a licenced builder specifically, please advise if my assumption was incorrect.

    thanks,

    Profile photo of macemace
    Participant
    @mace
    Join Date: 2012
    Post Count: 4

    Hi Aallii,

    We are talking about who can actually obtain a builiding permit to construct a multi-unit development.

    When I built my own house, I applied to the council for a building permit in my own name as an "owner builder", and not a registered builder.

    What jazz77 is saying, is that you can no longer submit an application for a building permit for mulit unit development as an owner builder. I.e. more than one dwelling. You mujst be registered

    From jazz77's post, I assume you can still do owner builder for a single development. I.e. construct one house.

    They have just put a stop to owner builders developing multi unit sites.

    Which I guess is fair enough, as you are not really an owner builder any more. you are a builder / developer. You are basically no longer just trying to build your own house – which the name "owner builder" suggests.

    Profile photo of christianbchristianb
    Participant
    @christianb
    Join Date: 2009
    Post Count: 386

    To answer your question:

    "One more question for Christian B
    Given that these types of constructions are one-offs, you mentioned that a builder may typically allow a little more fat for contingency. So would you expect them to add a margin more like 25-30% rather than 20%?"

    Across the industry the historical average margin is I believe around 16%. This has long been the accepted benchmark for a healthy building company. A project builder, building a product they know and understand may accept 10% or less for a reliable margin.

    A builder constructing a one-off (known in the industry as custom build) will assume an increased supply rate and will also generally look for a higher margin – say 20%. These two elements, combined, will result in a cost of at least 20% greater than a similar sized and finished "off the shelf" project house.

    Profile photo of jazz77jazz77
    Member
    @jazz77
    Join Date: 2009
    Post Count: 78

    Christian,

    Those margin rates seem realistic to me from my experience.

    I have often wondered though what do you say constitutes the "margin" in the building industry.

    I have some associates who regard supervicion as a seperate expense that has is combined with all other costs and then has a margin added to the total. Then we have some clients who say that they cant see why we charge supervision and a margin.

    OR

    All costs are calculated without any supervision then a margin is added (obviously a larger one) to the total.

    Basically is the margin what you would say is your total profit after EVERY expense.

    There are many ways to work it out but just wondering if you have any ideas on what constitutes the rates you have.

    mattnz
    Participant
    @mattnz
    Join Date: 2007
    Post Count: 574

    Christian, your earlier post was spot on, it aligns exactly with my post here https://www.propertyinvesting.com/forums/property-investing/value-adding/4343689 but explains it better.

    BTW I am currently doing 3 bed, 3 bath, single garage townhouses which are 125 sqm, in a location where the builld costs $1,800-$2,000 per sqm turnkey. 200 sqm may not be the optimal size, even if you can fit them on the block. For me it makes the difference of a 40% profit on costs at 125 sqm, whereas probably no profit at 200 sqm.

    Note also that profit isn’t the only factor. For me with a limited capital base, I reviewed and discounted some larger build configurations that may have had a higher profit margin, but had a prohibitive cost base.

    For argument’s sake let’s say your 200 sqm townhouse costs $300,000 and at 125 sqm it would cost $187,500. You may get an extra $120k in sales value for the larger build, so in theory you get an extra $7,500 profit per townhouse, but you have a much higher build cost and it will be much harder to fund.

    I am trying to work on the theory that for every extra $0.65 I spend, I need to be getting back $1 more in sales value. This is in line with the lending requirements of the banks which will fund a maximum of 65% of the final realiseable value (net of gst). By following this simple formula, I ensure that I can still fund the build with a limited capital base. If alternatively you are funding based on 20% of the costs, it becomes even more important to minimise them where ever possible.

    Cheers,
    Matt

    mattnz
    Participant
    @mattnz
    Join Date: 2007
    Post Count: 574

    Christian, if you supply fixtures and fittings, would the builder normally place their own margin on these items anyway?

    For example PC sums for tiles, carpets etc where the head contractor is also the project manager.

    Would you normally deliver them to site, or expect the builder to collect them when required at the appropriate build stage?

    Profile photo of christianbchristianb
    Participant
    @christianb
    Join Date: 2009
    Post Count: 386

    Jazz, generally speaking the margin is what's left after all costs and overheads are accounted for. Different people look at it in different ways, but to me this is the simple answer.

    Matt, I commend you for building 3br dwellings of 125m2 – that's a perfect size in my opinion.

    Interestingly, it's much easier to design 3br dwellings with 200m2 to play with. Designing a 3br with an "area budget" of say 120m2 is more difficult, but the effects on project profitability – as you rightly point out – are profound.

    It is also, in my opinion, better to start with a constraint like an area budget and work from that starting point rather than trying to cut things back later on. I would prefer our clients sacrifice a little space than sacrifice the quality of the space.

    Unless otherwise instructed, our office assumes the following "area budgets" for our projects:
    2br =  90m2, 3br  = 120m2, 4br = 150m2.

    As for your question about PC or PS items within contract, if the owner is to supply, that's exactly what they must do. In practical terms it's probably more about reasoned and informal negotiation.

Viewing 20 posts - 1 through 20 (of 34 total)

You must be logged in to reply to this topic.