Building a new home

Understanding what it would cost to build a new home is a huge barrier. Let’s try and make it a little more simple.
For an easy-to-digest rundown, download our handy PDF Guide to construction loans.

Understand your costs

Construction costs in New Zealand are high.  For a “Spec” house you can safely assume a cost of $2,000 per sqm.  So for an executive home of 250sqm your build cost will be around $500,000.

It’s possible to build more cost-effectively if you use a standard house design, especially if you use some level of pre-fabrication.  For a simple house design build costs can be as low as $1,500 per sqm.  You can build a 200-sqm home for around $300,000 and a 150-sqm home for around $225,000.

If you buy a section be aware of the costs around getting it ready to build on. In Auckland in particular there is a lot of basalt rock that can make it expensive to excavate and put in services like electric and water.  On sloping sites there might also be instability.  As part of your due diligence it might pay to get a Geotech report done to tell you what is underneath. This is around $3,000.

Financing the build

If you’re going with a fully fixed-price home,with a ‘turnkey builder’ (that’s when the build company does everything) the banks will lend you up to 90%. You can even use a deposit guarantee bond for the other 10%, which allows you to leave your funds in savings right up until settlement date which in some cases could be up to 2 years. It also means if for any reason the contract doesn’t get completed, you aren’t liable to pay up the deposit.

If you want some of the work completed outside of the builder’s contract, that adds a bit of risk, so banks will lend up to 80% for a fixed-price build.

For more on this, download and print out our Guide to construction loans.

Build contract

Regardless of how well you plan, most builds encounter some sort of issue, and about 60% of the time it means the budget will be blown.

Reduce your risk by paying close attention to the PC Sum (builder’s estimates) especially for kitchens and bathrooms. The most important thing to get right is the schedule of progress payments.  Some lenders use a “cost to complete” method, which means they will not advance more than the remaining cost to finish the build. If a builder front loads their payments it can create issues.

Paperwork required

  • A registered valuation of the project
  • Full set of plans/specifications
  • Building permit/consent
  • Builders risk insurance

How it works

  1. You buy the land with a 20% deposit
  2. Any extra funds are used to pay the deposit on the build contract and get permits underway
  3. At each stage the builder will invoice you and the client will get a progress report from the valuer
  4. The bank will then advance funds to you