Reno costs expected to drop

Posted on 5/04/2009  

Renovation costs in Australia are expected to drop 5% to 15% in the next six months, according to the quarterly cost guide from Archicentre, the building advisory service of the Australian Institute of Architects.


Archicentre general manager David Hallett says residential building costs have not changed appreciably in the last quarter; however, a substantial slowdown in the planning of new commercial projects 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% to 15% in some states," he says. “Coupled with rapidly-reducing interest rates we’re seeing the best climate for residential construction for many years.”


The Archicentre cost guide is a free guide to help people who are renovating or building new homes to assess quotes to ensure they are getting a reasonable price. Australians spend $7 billion a year on major renovations.


For new house and major renovations the cost structure is approximately …

·         materials 46%,

·         labour 33%,

·         fees, permits, GST 21%.


Hallett says that while construction costs will come down, the savings can be wasted by poor planning and failing to obtain competitive prices.


"Some renovators pay 60-80% more for their renovations because they are poorly-planned and they fail to tender their projects,” he says. "Once you add the cost of interest 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.”


He says one of the biggest mistakes is to get a quote only on the structural part of the renovation and fail to recognize that around 50% of the cost is in fittings and finishing after lock-up.


"Choosing the cheapest quote is not necessarily the right decision,” he says. “It’s vital to check the builders' credentials to ensure they’re registered, have appropriate insurance, can show examples of their work and can complete the project on time.”


Hallett says tendering is not rocket science; it involves 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, presents an opportunity to provide an accurate costing.


A contract also includes dispute resolution processes and helps limit the legal disputes which can arise if there is not accurate paperwork.


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