The cost of building a house

Allianz Home Insurance

Building a house today costs four times more than it would have over twenty years ago.

Between 1987 and 2012 the average cost of building a new house - excluding the land or landscaping - increased four-foldi. In 2011-12 we were paying on average $282,000 to build a new house; in 1987-8 the average cost was just $65,000i.

Cost of building a private house in Australia, source:iii

The increasing cost

The increasing cost of building a new house became more pronounced in the 2000s compared to the 1990s: the average annual percentage increase from 1987-88 to 1997-8 was at a rate of 5.5%; between 1997-8 and 2007-8 it was 7.7%i. The average rate of change has been an increase of 6.8 per cent each year since 1987-8i.

The ABS partly attributes the increased building cost to us building bigger houses today than we were over two decades agoi. Today new houses are on average a half (52.7%) bigger than those being built in the eighties: the average floor area of a new house in 2008-9 was 248 square metres compared to 162.4 square metres in 1984-5ii.

Cost of Building a New House in Australia by Year, source: x

By state

The cost of building a house also comes down to where you're building it: house construction is 1.5 times more expensive in the Northern Territory than in South Australia (the most and least expensive states respectively). The Northern Territory also experienced the largest increase in building cost along with Western Australia, where the cost today is 4.3 times as much as it was in 1987-8iii.

Australian State/Territory Cost of building 1987-8 ($) Cost of building 2011-12 ($) Times more expensive over 24 years
Australian Capital Territory 75,696 315,524 4.2
New South Wales 85,345 313,132 3.6
Northern Territory 79,819 346,224 4.3
Queensland 70,999 297,448 4.2
South Australia 67,880 227,069 3.3
Tasmania 63,426 246,555 3.9
Victoria 82,321 273,890 3.3
Western Australia 69,558 295,851 4.3
Source: Australian Bureau of Statistics, Australian Government, 2012, Building Activity: Australia, June 2012.

Regardless of where you are building your new house, costs have increased greatly, especially over the last 10 years.

Cost of Building a New House by State, source: iii

Other factors influencing the cost of a house

Since July 2012 the cost of building a new house has been subject to indirect impact from costs being passed on as a result of the carbon pricing mechanism (CPM) introduced in the Clean Energy Act 2011iv, often referred to in the media as the carbon tax. Prior to the introduction of the CPM there were claims made by the Housing Industry Association (HIA) that the cost for the average house would increase by $5 to 6 thousandv, by the Allen Consulting Group of an increase of between $2.7 and $3.7 thousand for a two-storey brick veneer housevi, and by Stockland that the CPM would add 0.6% or $2.5 thousand to the cost of one of their house-and-land packagesvii.

The cost of building may also be affected by various grants available from State governments. The New South Wales State Government provides a grant of $5000 where a new house costs (excluding land) up to $200,000viii. Queensland's State Government has removed mandatory water tank and environmentally-friendly hot water systems, which combined reduce the cost of a new house by $9000ix.

Construction costs have risen, particularly in the past 10 years, and it's important to be both aware of these increasesx and have adequate home insurance cover. To help, the Allianz replacement costs calculators can assist in estimating the cost of replacing your building and/or contents.

i Australian Bureau of Statistics, Australian Government, 2009, Feature Article: A twenty year history of the cost of building a new house,

ii Australian Bureau of Statistics, Australian Government, 2010 Feature Article: Average floor area of new residential dwellings,

iii Australian Bureau of Statistics, Australian Government, 2012, Building Activity: Australia, June 2012,

iv 2013, Clean Energy Act 2011 (Act No. 131 of 2011 as amended),

v Housing Industry Association, 2011, It's Time to Release the Numbers,

vi The Allen Consulting Group, 2011, The carbon price mechanism and the property sector: Report to the Property Council of Australia,, p.6

vii Schlesinger, L., PropertyObserver, 2011, Carbon tax won't increase housing costs much: Stockland,

viii Office of State Revenue, New South Wales Government, 2012, NSW New Home Grant Scheme,

ix Queensland Master Builders Association, 2012, Removal of mandatory requirements to reduce cost of building,

x The Master Builders Association of Western Australia, Construction Costs,