BUILDING a house is a decision entailing heavy costs, problems relating to finance and construction, delays in delivery and quality problems, titles, delays on building permits etc. It is an investment decision that should be studied carefully, as most families build a house only once in their lifetime and the final decision in most cases can be irreversible. Below are some general guidelines to help assess the cost of building a house:
Cost of building plot
Prior to the commencement of construction, at least the plot should be fully or nearly paid. This will certainly give you an advantage with the financing of the building costs for the house and it is a prerequisite for all financiers. For the transfer of ownership of the plot a Governmental transfer fee of 7%-8% (on average) is required on the market value (not necessarily what you paid for) of the plot.
Cost of mortgage & finance
To register a mortgage, a fee will be paid to the Land Registry Office of about 1% on the mortgage amount. Normally the mortgage amount is the actual loan + 20% on top. You will have to pay stamp duties and other bank expenses, which could take the form of a once and for all bank charge (say, on average £1,000). If you borrow from a bank there is an additional charge of approximately 1.5%-2.0% pa on top of the legal base rate of 4.5%. There are now many alternative housing schemes including Life Insurance finance, Co-Op financing etc which extend for 25-40 years and own contribution approximately 20% (usually through term life insurance).
Cost of architectural drawings
It is imperative to use a qualified architectural office, which will have the responsibility for the work done. You should not compromise on this since the architect is the most important person in the whole process of building your house. Yes, go to different offices and do discuss fee levels and then make your decision, but always use a qualified architect. Rates are normally around 5% on the total cost of the building and include the design and supervision. Some architects go up to around 6%-8%.
You will also need to employ a civil engineer to carry out the structural design. This cost, with supervision, is approximately 1% on the cost of the building. The cost of the building referred to includes all items but not the fees paid to the authorities and decorative items. So clear what is included is the total building cost with the architect, engineer, etc.
Cost of building licence
The Town Planning Department charges for the issue of the licence, which will cost you around £300 and for the building licence an added amount of £150-£200.
Cost of the quantity surveyor & m/e engineer
If you wish to engage a quantity surveyor for the building, a fee of 1% of the total building cost is required. The cost for a mechanical engineer (for large buildings) is approximately 3%-5% on the cost of the electrical and mechanical budget. Although the use of the above is optional, it is recommended for large and complicated buildings.
Cost of the building
Normal quality house: £500/m² for the covered area, £150/m² for the uncovered veranda, £250/m² for the basement
Good quality house: £550-650/m² for covered area (depending on quality/facilities), £180/m² for uncovered area. Plus the cost of a garage (£3,000), water borehole (£1,500), fencing and garden (£3,500-£4,500) for normal plot sizes.
Costs to other authorities
Extra costs have to be paid for connection to the Water Board, Electricity, Telephone and Land Rregistry Office (demarcation, issue of title etc), estimated at about £1,000 in total.
Total cost for a 250m² house
House 250m² @ £550/m² +/-£138,500
Fees and Licences £9,000
Interest on loan £6,000
Other authorities £1,500
Garden etc. £3,000
Sundry other expenses £4,000
Total cost +/-£162,000 or (£745/m²)
on top add 15% VAT.
To this price, you can also add the purchase of equipment and installation cost of central heating at approximately £20/m² and for air conditioning, an additional amount of approximately £40/m².
In recent years, with the introduction of VAT and the increase in labour costs, we have experienced an increase of 7-10% per year in building costs, a level which is higher than inflation. This has made the building of a house that much more difficult. A last item that can cost 5-8%, is the right of the contractor to ask for increase in labour costs and materials prices during the period of construction, which can reach 18 months.
n Antonis Loizou, FRICS – Antonis Loizou & Associates Ltd – Property Valuers & Property Consultants
