When building a new home, whether it’s on a brand new block in a Greenfield estate, or a Knockdown rebuild in Malvern, you will come across the term site costs.
What are site costs when building a property?
Site costs are everything that happens under the home being built as the builder can price the above-ground area by a square meter rate, general costing, etc. but the site costs require a bit more investigation which is why it’s always a separate item. The soil type, the slab required, the amount of steel reinforcement required to go in that slab or in certain stress points like corners, the type of concrete needed, there is quite a lot to it and I’m just scratching the surface here.
Depending on the amount of fall also determine what the site costs end up being, do you require retaining walls, or fill brought into the site to level a certain area. Then the fill area will be required to be compacted and inspected by an engineer before the slab goes down. Sites with a lot of fills can be rather costly to build on as they need more engineering, steel, maybe different types of slabs, more stairs, and complex roof designs. This is generally why you see lots for sale with a heap of fall or slope across them to be cheaper than a flat one in the same area.
How do builders price them?
A builder will want to start off with a soil test and assessment known as a feature survey of the lot. For the soil test, a Geotech company will go out to the block and drill a few holes with a large auger to take a sample of soil back to the lab for assessment. Once back at the lab, the engineers are looking for how compact or reactive the soil is, if it’s sandy, what type of sand, is there is a lot of clay and debris? They will then give the soil a grading (see table) all making reference to the amount of expected movement and reactivity.
Now they have the grading the engineer will use the information found in the feature survey to write a report on how the building must be built. The engineers are generally a third party to the builder and have their own license which is on the line if something goes wrong. The report will have a few different version on how the construction can occur, but the main things they are looking for is the soil grade, and any other factors such are tree’s which could cause movement and disruption to the foundations many year down the track.
A common scenario these days in the newer estates where developers are developing low lying land or flood areas, which need to be brought up to a certain level to pass what is known as the AHD (Australian Height Datum). This requires the developer to bring in truckloads of soil known as fill to raise the building area, ready for a new home to go on it.
The issue with this is, the soil brought in hasn’t been there for a long time versus the soil underneath it which might have been there for the past 100,000 years slowly becoming compact and a good surface to build on. If the developer doesn’t compact the soil well enough to produce a level 1 compaction report, the engineer will need to advise the use of bored piers or screw piles to be driven through the fill area and into the natural clay to create a solid foundation. No doubt this a proven method, but the downside is the cost of installing the piers or screw piles.
In brief for a bored pier, a hole is dug, then the soil is removed from the hole and inspected by the engineer. A concrete crane pump truck comes out to fill the holes with the specified concrete, once set the engineers to come back to access it, once the ticked off, the concrete crane pump truck and concrete team come back out again to start pouring the slab. It’s a huge additional task and can add sometimes in excess of $50,000 to the site costs.
So thats just for a flat site with fill, now you add in a slope and the site costs increase again. A general rule of thumb for slope is $15,000-20,000 in additional costs for every meter of fall. The more gradual the fall, the easier it will be to work with, but if it’s a steep decent/ascent you might need split levels and different rooflines which keep adding to the costs.
Fixed site costs?
This is something you really want to aim for when working with a builder. Provisional Sums, noted as “PS” in the contract or tender documents are items you want to limit, as these are, just as they say, provisional and can be changed. Not all, but some builders will, unfortunately, use the PS items to increase costs once you are committed to the build, so really try to get the number of these down as much a possible. However, if you go and buy a block with a heap of fall and fill on it because it was cheap, first don’t expect the builder to be able to fix site costs without some payment from you so they can carry out the investigation and secondly the savings on the purchase of the block, will go straight back into the site costs and you might end up with a design you don’t really like, eg stairs in hallways and different roof heights.
Are site costs all the same between builders?
Definitely not. Across the major volume builders, they will all have a different method of pricing, different risk factors they work between, and what they are comfortable with. The way they market themselves will also impact the site costs believe it or not. Some will have a very basic allowance in the base price or “from” price you might see to get you in the door, pay a deposit and then pile on the actual costs once you’ve completed your colour selections, told all your friends about it and fallen in love with the home. While other builders are very upfront with the costs, even though it makes them seem more expensive at the beginning, their sites costs might look a little high initially, but when it comes time to complete your colour selections the upgrades will be less of addition versus the so-called cheaper builder.
Unfortunately, buyers get caught up in how the pricing is made up and not the end number which should be the real focus. So when assessing builders don’t get sucked in by the “from” price, look at the end number or the total once everything has been factored in.
Here is an example of how things can play out between builders.
Billy and Sam are looking to build a 25 square home, in a new Greenfield estate. They are looking at 2 different builders who both have a 25 square design they like. They’ve decided to go down the path of investigating both builders because they can’t decide.
Builder A has a Spring Sale on their 25 square home and slashed the price to “from $159,000”.
Builder B also has a Spring sale for their 25 square home which is not a “from” price, but an as displayed price of $235,000. As displayed essentially means you get everything in the house as it’s displayed (minus furniture and additional cabinetry), plus your site costs.
Billy and Sam have already chosen their block of land, so the builders can make their assumptions on if they would build in the estate, and work out site costs.
Builder A has said site costs would be approximately $20,000 and they can’t fix them Builder B came back with $21,541 but they are 100% fixed.
Builder A $179,000.00
Builder B $256,541.00
Now the exciting stuff, colour selections, and electrical appointments to decide how they are going to turn it into their dream.
First up Builder B was able to get them in within a month, to complete the colour selections and electrical appointments all in one day because it was an “as displayed” package. They ended up spending an additional $8,000 mainly on electrical, larger tiles, and some niches in the bathrooms.
After 3 months or so Builder A was able to get them in for their colours only and the electrical would need to be done another time. It took them all day to complete and figured out when they were walking around the showroom, that a lot of the items weren’t actually included such as overhead cabinets in the kitchen or even basic carpet or tiles. During this appointment, they added $58,000 worth of upgrades along with the POA items because the builder didn’t have pricing available. At the electrical appointment which was held at another location, they ended up spending another $18,000 as they didn’t realise downlights weren’t included.
Builder A $255,000.00
Builder B $264,541.00
As Builder B has already fixed the site costs, there is no need for any additional meeting for Billy and Sam and they can move straight to contract to sign and finish the builder selection process.
Builder A needs to complete a tender document which will require an assessment of the land including a soil test and a survey of the block. The block isn’t going to be titled for 6 months which means the assessment can’t be completed and Billy and Sam will have to wait until Builder A can get on the titled block for the assessment.
6 months go by and the titles are pushed back because the developer had an issue and unsure how long it might be. As you can imagine this is causing some stress for Billy and Sam because they don’t even know how much their house is going to cost just yet.
Another 3 months go by and Builder A can finally get out to the block for an assessment of the block and have booked the tender appointment with Billy and Sam for 2 months time allowing them to complete the pricing and documentation.
Billy and Sam finally get to attend their tender meeting to find out what everything is going to cost including the now fixed site costs and the POA’s from the colour appointment. They, unfortunately, got a bit of a shock when Builder A said their site costs would now be $31,500 compared to the $20,000 they were originally told. The POA items also came back in with an additional $5,000 to the upgrade items and now have to make the decision if they keep it in, or minus it because the site’s costs were a lot higher than they thought.
Builder A $271,500
Builder B $264,541 (NO change)
In this very brief example, you can see how it’s not all about who is the cheapest at the beginning and can quite quickly cost you more than you had originally thought. Costs are very similar between a lot of the major builders, it’s just how they are marketed and the way they arrive at their overall build price. It’s also important to understand the amount of time involved as Builder B had their contract completed long before Builder A, making it a less stressful experience for Billy and Sam.
So what are the key points when thinking about site costs?
Don’t get sucked into all the marketing
Do your research, what are reviews saying? Don’t go off the bad ones, try to see what the builder has done right, but obviously if there are lots of bad ones, RUN!
Ask for the displayed price and a list of upgrades. You can use this to compare total costs between builders instead of the “from” price.