Drop in Renovation Costs
April 22nd 2009 04:56
David Hallett General Manager of Archicentre releasing the organisation's quarterly cost guide said residential building construction costs have not changed appreciably in the last quarter. However, a substantial slowdown in the planning of new commercial projects around Australia will see many tradespeople moving from commercial to residential over the next six months.
"This will result in more competition in the new home and renovation markets and we could see a drop in the costs of custom designed homes and renovations of 5 per cent to 15 per cent in some states."
Mr Hallett said, coupled with rapidly reducing interest rates we are seeing the best climate for residential construction for many years.
Archicentre is Australia's largest initiator of home renovations and collects data on renovation trends as well as costs.
The Archicentre cost guide is a free guide provided by Archicentre to help home owners who are renovating or people who are building new homes with a guide to assess quotes to ensure they are getting a reasonable price.
The guide can be used in conjunction with Archicentre's Design Guide for home renovators and also includes explanatory notes to provide extra information to enable home owners to distinguish between standard and up market finishes, and the labour and materials components of projects. Owner builders often disastrously underestimate the savings they will make by providing their own labour.
For new house and major renovations the cost structure is approximately materials 46%, labour 33 per cent, fees, levies, permits, GST 21 per cent; with a 5per centto 15 per cent increase in labour in country areas.
Mr. Hallett said that whilst construction costs will come down, the savings could be soon wasted by poor planning and failing to obtain competitive prices.
"Some renovators are paying between to 60 per cent to 80 per cent more for their renovations because they have poorly planned renovations and fail to tender their projects. Australians on average spend $7 billion a year on major renovations.
"Once you add the cost of interest onto the amount over the normal period of a home loan, the amount lost can run into tens of thousands of dollars on the average renovation of around $100,000.
Mr Hallett said that one of the biggest mistakes people make is that they get a quote only on the structural part of the renovation failing to recognize that around 50 per cent of the cost is to be found after lock up in fittings and finishing.
"Whilst tendering provided a good guide to the cost of the project choosing the cheapest quote was not necessarily the right decision.
"It is also vital that the builders' credentials are checked out to ensure they are registered, had appropriate insurance, are able to show examples of their work and importantly are able to complete the project on time.
"Tendering is not rocket science, it is carefully documenting and specifying the entire project so everything can be costed accurately and planned.
"For the builder the provision of tender documents including the type of contract to be used and the specification of fittings and finishes provides an opportunity to provide an accurate costing.
"A contract also includes dispute resolution processes and is a major step in limiting the legal disputes which can arise if there is not accurate paperwork."
Architects are well placed to save home owners thousands of dollars off their renovations by preparing and managing the tender process, a key part of their normal design, documentation and contract administration service.
In the current climate many home buyers or renovators are utilising Archicentre's quality assurance program to independently check that their new home or renovation is being constructed to the contracted standards and to handle any disputes.
Article from Archicentre
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