Perhaps obvious, but creating larger buildings is more complicated, time consuming & expensive than domestic "sticks and bricks".
🏢Apartment #construction creates bigger, heavier buildings, from the foundations at ground level, and each floor above, all of which carry large loads.
📋Building regulations for multi-residential are more onerous, & servicing requirements more complex due to density – fire protection, electrical, heating-cooling, noise etc.
🏗️Commercial structures need lots of concrete, aggregate & steel (timber is niche, currently more costly). They are far more labour intensive & time consuming.
🏠 Contrast with domestic homes or townhouses – structures just need to hold themselves. Lighter weight, less coordination, quicker & easier to build.
🚆Meanwhile, public infrastructure investment has grown rapidly the last 5 years – projects competing for the same materials & workers. This has crowded out the private sector, which is more price sensitive, and elevated the price of materials & labour.
💸Pressure was extreme during the pandemic, & whilst cost growth has slowed, existing commitments will keep prices high & labour in short supply for the near term.
👷🏻♂️Recent media commentary has covered high pay rates for union labour (often necessary in larger apartment projects). Not arguing the merits, I simply point out that expensive &/or less productive labour increases the end cost of construction for the consumer.
Translating this into a ballpark comparison of building costs: 🏠 domestic single storey house – $1400-$1600 per m2 🏘️ double storey townhouse – $2200-$2400 per m2 🏢 multi-storey apartments – $5500-$6600 per m2
Costs vary with design, specification and finishes etc., but the broad point is valid. Building in regions (or anywhere in NSW…) can add 20%+ to these rates.
📈Also, these are only the actual building costs. They exclude: – land – design/engineering – marketing/sales – compulsory insurances – planning fees, taxes, charges – development contributions – funding costs – GST (1/11th off the top goes straight to the ATO)
👆🏻 Most, except land (sometimes) & contributions, are higher in apartment construction. And this is also why, proportionately, the underlying land price for apartment projects can be less material than for other types of #housing.
🤔Nothing in the short-term will materially reduce actual apartment construction costs. In addition to approval timeframes already covered, there are design or #planning regulation changes which could assist reducing net cost – I will discuss in a future post.
Australia will be better served by focusing on feasible dwelling types & less on magical thinking as the solution to the housing challenge.