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 $65,000i.
The increasing cost
The increasing cost of building a new house became more pronounced in the 2000s compared to the 1990s: the average annual percentage increase from 1987-88 to 1997-8 was at a rate of 5.5%; between 1997-8 and 2007-8 it was 7.7%i. The average rate of change has been an increase of 6.8 per cent each year since 1987-8i.
The ABS partly attributes the increased building cost to us building bigger houses today than we were over two decades agoi. Today new houses are on average a half (52.7%) bigger than those being built in the eighties: the average floor area of a new house in 2008-9 was 248 square metres compared to 162.4 square metres in 1984-5ii.
The cost of building a house also comes down to where you're building it: house construction is 1.5 times more expensive in the Northern Territory than in South Australia (the most and least expensive states respectively). The Northern Territory also experienced the largest increase in building cost along with Western Australia, where the cost today is 4.3 times as much as it was in 1987-8iii.
Source: Australian Bureau of Statistics, Australian Government, 2012, Building Activity: Australia, June 2012.
||Cost of building 1987-8 ($)
||Cost of building 2011-12 ($)
||Times more expensive over 24 years
|Australian Capital Territory
|New South Wales
Regardless of where you are building your new house, costs have increased greatly, especially over the last 10 years.
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, http://www.abs.gov.au/AUSSTATS/abs@.nsf/featurearticlesbyCatalogue/2609898B87F95519CA25792D000E2DF5?OpenDocument
ii Australian Bureau of Statistics, Australian Government, 2010 Feature Article: Average floor area of new residential dwellings, http://www.abs.gov.au/ausstats/abs@.nsf/featurearticlesbyCatalogue/8BB3F6B866BC35CECA2578A000153026?OpenDocument
iii Australian Bureau of Statistics, Australian Government, 2012, Building Activity: Australia, June 2012, http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/8752.0Jun%202012?OpenDocument
iv 2013, Clean Energy Act 2011 (Act No. 131 of 2011 as amended), http://www.comlaw.gov.au/Details/C2013C00058
v Housing Industry Association, 2011, It's Time to Release the Numbers, http://hia.com.au/media/~/media/Files/MediaMicrosite/Media%20Releases/Economics/Its%20Time%20To%20Release%20the%20Numbers%2008072011.ashx
vi The Allen Consulting Group, 2011, The carbon price mechanism and the property sector: Report to the Property Council of Australia, http://www.allenconsult.com.au/resources/acgcarbonprice2011.pdf, p.6
vii Schlesinger, L., PropertyObserver, 2011, Carbon tax won't increase housing costs much: Stockland, http://www.propertyobserver.com.au/news/carbon-tax-won-t-increase-housing-costs-much-stockland/2011081151119
viii Office of State Revenue, New South Wales Government, 2012, NSW New Home Grant Scheme, http://www.osr.nsw.gov.au/lib/doc/factsheets/ofs_nhg1.pdf
ix Queensland Master Builders Association, 2012, Removal of mandatory requirements to reduce cost of building, http://www.masterbuilders.asn.au/media/media-releases/removal-of-mandatory-requirements-to-reduce-cost-of-building
x The Master Builders Association of Western Australia, Construction Costs, http://www.mbawa.com/custom/mba_directory.asp?SID=35