Building your dream home is an exciting endeavour, and for many South Australians, owner building has become a popular option to achieve a personalized and cost-effective result. If you're considering embarking on the journey of owner building, this 2 part guide is here to provide you with valuable insights, tips, and a step-by-step roadmap to make the process smooth and successful.
Understanding Owner Building:
Owner building involves taking on the responsibilities of a licensed builder to manage and oversee the construction of your own home. This can be a rewarding experience, allowing you to have greater control over the design, quality, and cost of your new home.
Why Owner Build?
The main reason we have clients opting to owner build is to save money. As we are all aware building a house in Australia is expensive, especially post COVID, where inflation in the building sector went through the roof. So what could you expect to save being an owner builder?
Lets break it down:
When you conventionally engage a builder under a fixed price contract they have a profit margin, every business needs one, and building companies are just the same. So lets create a hypothetical fixed price contract. The Builder has accurately estimated the cost to build including all materials a labour. The price is $500,000. This includes a site supervisor for the duration of the project. Now the builder adds his profit margin of 10%. The contract value is now $550,000.
But this is not the only margin you can save money on. The Builder is assuming all the risk associated with the project, and if these risks do eventuate, the builder could suddenly be losing money.
One of the risks is inflation (or escalation). Lets say you sign the contract and the builder specifies a start date in 3 months to allow him to schedule everything, and then the build takes 9 months to completion, the prices he estimated may increase in the next 6 to 12 months. in FY 2023 inflation in Australia was around 7%, higher in the construction industry but lets use 7% for the year as an example.
The next risk the builder will commonly consider is the risk of the project. This could include latent conditions, design risk, Heritage work etc. this particular build is brand new, but the site is quite remote so the builder assesses the fee they would like to charge to cover it is 3%.
Therefore risk and escalation equal 10%, and now our contract price is $605,000.
So could you potentially save 20% in this scenario? Yes, but not likely. As the owner builder you are now wearing the risk and escalation. If it does not eventuate, you save the money, but things are never simple and something may go wrong or get more expensive.
The last major saver is doing it yourself. The more you can do yourself the more you save. Even if you pay yourself a hypothetical salary for your time of $1838 per week (average Australian salary 2023 - source - Australian Bureau of statistics) A subcontractor will typically cost $3080 per week ($77 inc. GST per hour. NOTE: this is an average price for this example, all subcontractors charge different rates). You typically wont be as fast as a professional subcontractor so lets add 50% to your rate to reflect your slowing the project down and purchasing a tool or two etc. That means you cost $2757, giving you a saving of 11.7% on a typical subcontractor.
But Builders get trade discounts and have reliable subcontractors!
Yes they do, they have buying power with suppliers and a contact book full of subcontractors who they deal with regularly. As an owner builder you typically do not have any of this, maybe uncle Bob is a tiler but that's all you have. So how can you get the same deals and subcontractors as a builder?
The Nominated Supervisor.
In Australia an owner builder needs to nominate a supervisor. This is a licensed building works supervisor, building inspector or a private certifier. They will be in charge of ensuring the build is compliant with the National Construction Code (NCC) and the Development Approval (DA) issued by the council.
It is best to select a nominated supervisor who is a general builder and will give you access to their sub contractors, suppliers and trade accounts.
The nominated supervisor will charge a fee for the nomination, they will be the ones liable at the end of the project for building compliance, and you will work together with them through the entire build until you attain the Certificate of Occupancy (COO) .
Be sure to check your nominated supervisor has Professional Indemnity Insurance (request a certificate of currency) and check their license or registration is current.
Your Home, Your way.
When you owner build everything can be done the way you want it done, you now have the power to use the subcontractors you want, to select local products and materials from local suppliers and hunt for bargains and sales.
One thing we will note though is that owner building often takes longer than anyone expects. This is often due to doing a lot of things yourself and you can only do so much at a time. Builders can double up on labour by having multiple subcontractors working on a project at the same time.
In Part 2 we will go through budgeting and planning, Legal requirements, Notification Requirements and insurances. Find Part 2 Here
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