The pressure on household finance is very high in Britain where the housing shortage has forced many to pay very high rents. As per the general rule, one should not pay more than 30 percent of the salaried income on housing where it should include utilities and costs like mortgage, property tax, and maintenance and how much does it cost to build a house.
This standard has been used since 1981 but in many areas in the UK, families are burdened by the rental costs, which have crossed over 50% of the income. In London, some are paying more than 70% of their salaries on rents as the country faces a shortage of 4 million homes.
As per the calculations of the National Housing Federation and charity Crisis- unaffordability resulted in homelessness where the current generation, the so-called boomerang generation, is living with their parents in the age when, otherwise, they would have separated or moved out.
The ONS report finds shortfall of homes cannot be met immediately and the country must build 340,000 homes in a year until 2031 to tackle the backlog.
With the growth in housing prices, many people are struggling to get on to the property ladder and some have found solutions to their problem in tiny homes. Many constructions and property firms are offering tiny 256 square feet homes, which have wheels on the 'Kokosing'.
How much does it cost to build a tiny house?
Tiny homes can be built on an average area of 100 to 400 sq. ft. for the modest requirement where it can be put on trailers, which can be taken anywhere. Such homes are suitable for people who want to live a simple lifestyle and save money on rents. In many parts of the world, families fed up with paying thousands of rents have opted for tiny homes.
Some beautifully decorated tiny homes are preferred by buyers who find the reduction in space more comfortable as the clutters and extra work related to the maintenance of large homes are reduced and people get more time and moments to spend together in a smaller space.
Such choosing homes are promoted by firms that believe it offers several unique livable features and it is the reason behind the popularity of such homes. In the UK buyers can get a tiny home for £60,000, which can be a furnished place with electrical attachments like a 32-inch flat-screen TV, dryer/washer, stove and plenty of storage space.
These homes hold stores as hidden rooms in the living room’s flooring or basement or along the stairways. Some of the 256 square feet tiny homes have a double bedroom and a sleek bathroom. Some builders construct such transportable homes as luxury homes with a full kitchen and a full bath option with plenty of king size/queen size bed space area.
Buying a tiny home in the US
In the US, one can buy a tiny house for as low as $8000 to as much as $150,000 – which is lower than the median home listing price in the country, but some homes can be more expensive when compared per square foot, and such homes may come with additional unexpected costs.
It is a kind of ready to buy to let option that can be bought online right away and some such homes are set up with equipment and furniture for extra guests and benches, which can be deployed if needed. Technologically, advanced methodologies are used to keep the space easy to supervise.
However, it is considered a risky investment and it constitutes a small section of the market as it is difficult to resell where the median cost can be $45,000, while, a luxury one can cost over $150,000.
How much does it cost to build a house per square meter?
The average cost for building a house in the US is $ 248,000, which is, in the range of $1000 to $1650 per square meter. When building a home, one should have full control over all its aspects but as the average sales price is expected to approach $300,000 mark, many homebuyers think of constructing the home from the start as it could save a lot of cash and one may have better control over the design they want.
How much to build a house?
The key area of investment includes -
1- Land – Cost can increase or decrease depending on the land selected for construction. It can be expensive to get a perfect plot where the right location can increase the cost. People prefer to get a plot at the town center or at a place that is connected through the transportation system to markets, workplace, and educational institutes.
2- Hiring professionals - Cost of hiring professionals (land surveyors, engineers, and architects), labor and machines can be over $1000.
- Contractor – A general contractor helps in building the home. He is responsible for hiring subcontractors and ensuring the legal aspects involved in completing the job. He may or may not be responsible for hiring labors.
- Architect - An architect can help in providing the best design of the home on the specified area of the plot. A consultation from an architecture helps in designing the blueprint. It is advised to hire people having great reviews and ratings.
3- Site work – The home building site work involves expenses on clearing trees or preparations before starting the project.
- The construction work involves various stages where the builder first creates the base, the basement foundation. The slabs, concrete, and other building material will be required.
- It involves designing floor plan and foundation, framing/exteriors, attachments – electrical, plumbing and making the interiors and furnishing.
- Frames are the basic structure and the cost involved in creating it can be over $50,000 – which depends on inflation and other market factors.
4- The overall cost of all the above work can be over $80,000.
How much does it cost to build a concrete house?
- Concrete blocks have lower carbon footprints and they provide versatile construction options. It is often used to build homes and big buildings. Big buildings use reusable molds that are of a specific shape.
- There are multiple options offered in a concrete house that can be made up of concrete blocks or material like the insulating forms or precast panels, which are more expensive.
- The removable forms are used at the basement walls as it provides insulation.
- The cost depends on the structure and size. An unfinished basement run can cost around $10 to $25 a square foot and the finished basement can be priced up to $30 to $100 a square foot.
- The price varies depending on many factors where it can be as little as $10,000 to as much as $175,000.
How much should I spend on a house?
- As per the Federal Housing Association, people can afford to spend up to 29% of the gross income on housing, and it can go up to 41 percent if they do not have any debt.
- Another is the 28/ 36 rule, where it is said that one should not spend more than 28 percent of the gross income and not more than 36 percent on the total debt. The method is used by the mortgage lenders to assess the borrowing ability of the homebuyer.
- If the debt to income ratio is more than the limit mentioned, one may not be able to pay back the loan amount.
- In a big city, the cost of living is high and one may not be able to keep up with the lifestyle cost below 30 percent of income. Like in New York City – about 60 percent of the income is spent on rent as there is no alternative to it. For those targeting a big saving for retirement, the rents reduce the retirement savings.
How much does it cost to build a house in Texas?
- Texas is 27th least expensive city where the average property price per acre is $7542. One cannot build a house without taking a permit for structural changes in the city. The municipality has rules and it requires information related to the owner’s name and contact details.
- One has to provide the contractor’s name, details and expected purpose/use of the building under construction. The description of the work that will be done at the premises and the total value of the project should be informed to the authorities to get a sanction.
- Additionally, one requires an electrical permit, developmental permit, sign permit and other permits for the proposed projects and the charges of getting it can be over $1000.
- The construction process includes the use of labor-intensive materials like concrete, wood and the contractor’s cost and the labor price, which can increase the overall cost of construction. As per estimation, the cost can be approx. $90 a square foot (or approx. $900 for a square meter).
How to build a house?
- A house can be single, detached or a building, where the cost depends on location, the material used in construction and the plot size. Detached homes require standalone structures where the design and the cost of material used in construction help in getting an estimate of the cost.
- In the UK, 75% of the application for building permissions is granted by the authorities but if the application is refused one can amend the application and reapply. Almost 40 percent of the applications are granted after rejection at the initial stage and in most such cases, the modified application is submitted free of cost.
- One has to hire an architect and a contractor for building a house. To get a designed home in the capital city of London, the minimum cost can be £1,750 per square meter, depending on the region/area. The price can be more by £4,000+ per square meter for better finishes.
- At the start, one has to build the foundation where processes like excavation, backfilling and pouring expense can be in the range of $4000 to $12,000.
- After the completion of the project – which can take more than 6 months depending on factors like weather conditions, a final inspection will be required to ensure the home is suitable for the inhabitants.
Self Build Cost Calculator
One can get the estimate of a project by using an in-depth build cost calculator. It is a tool that gives an indicative ready reckoner which helps to determine the self-build cost. The tool is based on the average rates collected from various estimating services.
This is not used to get the exact cost as the budget of a project varies depending on the specific requirements of the plan. The tool is based on the GIA industry standard used by professionals and estate agents for house size and price measurement.
How much does it cost to build a house in Los Angeles?
Even affordable housing builders spend more than $400,000 a unit, on average, for a new house in Los Angeles that is more than any other city in the USA. The November 2019 data at zillow.com shows the median home value in Los Angeles is $713,617.
The prices have gone up 4.6% in the last year and it is predicted (by Zillow) the price will rise by 3.5% in the next year. The median list price per square foot in the city is $550.
How Much Will Materials Cost?
- The commonly used material used for construction projects is cement, wood, metals, clay, concrete and bricks. The choice of each item modifies the cost of the project. The cost of foundation work can be over $33,447.
- The investment on walls, windows, doors, and roofing can be over $95,474.
- Interior finishing like cabinets, countertops, and flowing can cost up to $85,642.The cabinets and countertops in the kitchen and bathrooms can cost over $16056.
- The price of the material used in building a house varies depending on the size and location. The basic cost calculator can be used to estimate the bricks, concrete or volume required for a specific construction.
- If we calculate the price incurred in using a concrete grid, we may have to assess the cost of different types of the slab - monolithic, post-tensioned or the one with foundation walls.
- The residential building may require concrete cubic yards of minimum 4-inch thickness and the average cost of pouring the concrete can be in the range of $1.36 to $4.99 per square foot. In such a condition, the cost of labor is around 3 per square foot and this means for constructing a 400 sq. ft structure - labor cost can be $1200.
- Additional material like a rebar grid is needed to strengthen the slab to prevent cracking. One may have to use the rebar calculator to estimate the amount needed for a concrete grid and then the prices can be estimated.
- The stained and colored concrete grid may need a beautiful finish where the cost per foot can be up to $10. One may have to additionally pay for the sealer and the finishes.
- One cubic yard of the material is equal to 2.03 tons and the costs an average for it could be around $50 to $75 a ton. Bulk concrete is measured and delivered for huge constructions where the price depends on PSI (pounds / sq. inch).
The NAHB reported the price paid for material used in construction projects declined by 0.3% in September 2019 (PPI data). The prices of material used in building homes increased 1.7 percent in the year 2019 – which was the slowest rate through September 2015. House affordability was widely impacted by an increase in the regulatory costs, shortage of construction workers, tariffs on $10 billion worth building material and concerns over housing finance.
Is It Cheaper to Buy or Build a House?
On calculating the cost difference, one may find the rate of building a house is lower than buying an existing home, particularly when the project starts and ends on time, as per the predetermined plan, but the cost can increase if the project delays or the work is halted due to some reasons. One should try to get the most cost-effective specifications that are worth the investment.
Alternatively, some builder construct can be bought at a lower rate where one may get additional features like interior or exteriors with a finished basement or basketball court. But in the case of the building if the needs are not determined before starting; the cost may increase beyond the predefined budget.
To avoid overspending, one should do complete research and know about all the associated costs. People who are unsure about how to start and end such projects should opt for buying a home instead of indulging in big construction projects.
In the UK, the typical cost of building a home can be £1,500-£2,000/ sq m. If you stick to your original design and specification the cost can be low but changes in plans can cost a great.
How Your Involvement Affects Build Costs?
- At the time of construction, someone has to manage the process, ensure the right people are hired for the job and the correct material is bought. Self-involvement improves coordination with the labor, the contractors and the architect.
- They can coordinate effectively to know about the material, trades, plant, and tools to meet the architectural specifications.
- It also helps in maintaining the legal responsibilities on the site and it also reduces the overall cost by up to 15%.
- One of the critical issues associated with self-build homes is to stay within budget. This is possible in case the contractor estimates the costs accurately and sticks to the budget.
Why might a new home cost more?
- A pre-owned home has a higher upfront cost and it can be 20% more expensive. For an old construction, one has to pay the upfront cost of buying and also the maintenance cost.
- The upfront cost for a single-family home can be up to $223,000. For a 1500 sq ft house, built in the 1960s, the rates can be up to $148 per square foot (approx. $1500 per sq. meter). As per the NAHB, the median rate of constructing a single-family house is $289,415 ($103 per sq ft).
- Prebuilt homes have poor energy efficiency and its maintenance price is higher.
- If you are building or buying a new home, everything from heating to pipes will be new and the cost of repair reduces for a few years.
- A newly built home offers higher chances of appreciation than existing ones.
Tax benefits for new build houses
There are certain tax benefits of building your own new home as new built qualifies for rebates-
1- Stamp duty - Buying a plot saves stamp duty as compared to buying an existing home as the stamp duty on land is less than the house. In the UK, one has to pay stamp duty on the property for those that are nonresidential and priced over £125,000 or £150,000. There is no stamp duty for land gifted by a family member.
2- VAT - New properties are free of VAT and a self-builder can claim back the VAT paid on the material. However, one cannot claim a rebate for the property where you take supervisory services or professional services like design, surveys or planning. The average VAT reclaimed through the scheme is up to £13,200, which cannot be reclaimed if the property is bought for business purposes (not including work from home).
3- Insurance - Homeowner’s insurance on a new home is less expensive as compared to older homes because a new home is built on current standards.
4- CIL - Self builders who plan to own the property and occupy it as the principal residence are exempt from CIL – the community infrastructure levies.
5- Capital gains - In case the house is the principal residence, there is no capital gains tax payable if you make a profit on selling a new build house.
What are the other costs of building a house?
- Additional cost has to be paid if one has to pay for dismantling the existing structure on the land.
- The cost depends on the requirement of the project owner. If the project owner wants to create a complex home – it may require a complex design that can be created by the architecture.
- The cost of hiring architecture is around $5000 but in some conditions, a simple design can be made, which can be worth not more than $2000.
- The cost of transportation of the building material and the price of services should be added to the overall cost.
- Exteriors may require wood. The expense of electrical, plumbing and interiors varies depending on multiple factors. If the owner requires sophisticated systems (insulation, drywall, and others) the overall cost of construction increases.
What other factors affect the cost of building a house?
The cost of building a house can change due to factors e.g.
- Condition of the construction site – The cost of building can increase or decreases if the plot requires extra work. Plot with poor soil conditions, conflicting utilities, wetlands, river stream, groundwater, buried storage tanks or links to archeological sites may require extra work.
- The cost of raw material, economic factors like inflation and the distance of the site from the supplier’s location –affects the overall cost.
- The design planned by the architecture can also have a huge impact on the cost of the building.
- Labor costs and project schedule are two important factors. Delay in the project increases the cost indirectly.
Is building a new house profitable?
According to the US Census Bureau, the average rate of a new home was $388,000 in 2019, while, the median price was $226,800 (as per Zillow).
The self-build homes mostly tack on the cost of construction which contributes to the profit margin. Homeowners are also benefited from the appreciation of a newly built home.
What factors affect build cost?
Leading websites connected to homeowners related to home improvement professionals claim the average rate of building a house is approx. $147,000 and it can be over $436,000 in some cases but homebuilding costs can be higher depending on the desire of builder.
For the average buyer, the cost of $100 to $400 per sq foot (square area) can result in the construction of an expensive home. Those who want to own a less expensive home can consider the builder who offers limited floor plans, where one can get certain customizations at a lower price and buyers' cost can be saved up to 15%, mainly, on home building.
How much does it cost to build a house from scratch?
- To start building a house from scratch, you need to find the right type of plot and get permission from the local authority by registering for the Right-to-Build.
- Homebuilding expenses include the paperwork cost which is required to get permits from the legal authorities. One may have to get approval for the land and the design made by the architecture from the local authorities before starting the construction work. The local authorities may inspect the area to check the work progress.
- The foundation cost depends on the area and it can be over £10,000 for engineered foundation solution.
- Insurance by the contractor and the owner of the project can increase the overall expenses. Insurance is required for theft, fire, liabilities and other types of damage at the site. For self build, one has to get the insurance policy, which can cost in the range of £500 and £1,000 depending on the size of the plot. Also, the self-builders may require a structural warranty of 10-years against the defects in design, material or workmanship.
- In the UK, the load-bearing walls can cost over £30,000 and the ecological timber framework can cost around 1.5% (£3,000). The additional cost is required on insulated concrete formwork and blockwork.
- The last part of the building involves the finishing costs where one may have to build cabinets, bathroom fixtures, light fixtures, appliances, etc. One of the most basic levels of finishing may cost $90 a square foot, while, the cost can increase over $1000 an sq. ft. depending on the required provisions.
How much does it cost to build a house in the UK?
In 2019, cost estimation for a house is anywhere between £1,750 and £3,000 per m2. Building costs in the UK start from £1,750 per square meter. For a 130 sq. m. project in London with 3-bedroom with free parking and adequate storage space, kitchen IKEA carcasses and MDF doors and timber cladding with luxuries like tiled terrazzo floor and a large pond landscaping – the price can be around £265k, which is almost equal to £2000 sq m.