What are square metre rates for building or renovating?

And how can you use them to determine your costs? Read more here.

“What’s the square metre rate?”

Square metre rates. They’re the place that so many people begin their projects – both inside the industry and outside of it (as homeowners / clients).

And yet, they can be such a dicey way of commencing your project, and provide such huge misinformation, so there’s some things to be aware of.

Why do we start with square metre rates?

Well, projects need to begin somewhere. And it seems simple enough to understand that if a square metre rate is, say $2,500, and our budget is $500,000, then our budget should accommodate 200m2 of home for that.

And that gives us somewhere to start – not only with the design, but in discussion with professionals about fees, and briefs, and looking at ideas of what a 200m2 home would look like.

But what is that square metre rate based on?

One of the trickiest things with square metre rates is knowing exactly what they include, and what they represent.

I recently saw a designer’s fee proposal that outlined a budget analysis for their client. It had a base square metre rate for the home. Then, they added fixed amounts for cost-intensive areas such as kitchen joinery, bathroom fitout, built-in storage. Then they added GST and a contingency.

And the square metre rate almost doubled.

When you speak to volume builders, they’ll usually have quite a low square metre rate, but it doesn’t include floor finishes, light fittings, or any external works such as driveways, landscaping or fencing (which can sometimes increase the square metre rate by 1.5 – 2X).

Speak to custom builders, and their square metre rate is likely to include all of those things.

Unless you understand (with some transparency) exactly what the square metre rate covers and includes, it can be a deceptive source of costing information.

Who is giving you the square metre rate?

The source of the square metre rate can also create some problems. So, you need to ask some questions to determine the reliability of it.

If it’s from your architect or designer…

How have they established that square metre rate? If it’s from their previous projects, do they know what the final sum on the job was (not just the contract rate or quoted amount at the beginning?) Is the square metre rate for jobs similar to yours, and is it recent information?

If it’s from your builder …

See above regarding what it includes. And is their square metre rate averaged over their range of projects? Or, can they show you a similar project to yours, and advise the square metre rate based on current prices.

Inside my other business, Live Life Build, we actually teach builders to create Project Sheets at the end their completed jobs. This is where they revisit what the job cost, vs what they should have charged for it to cover their overheads and profit, and create a document outlining the job type, site type, general finishes and standard of project, with a square metre rate (showing what it includes). That way, they have something to physically compare your project to (that you can look at and agree on), and benchmark the square metre rate you’re going to use.

If it’s a Quantity Surveyor …

Is it for projects like yours, built by builders who have similar business model to the type of builder you plan to work with? Some QS guides available online are really representative of the volume builder projects, and if you plan to do a full custom build, they won’t be relevant for you.

If it’s your own research …

Again, you really need to understand what the square metre rate includes. Be honest about the kind of project you want to do, and what impact that has on your level of specification and finish. Speak to professionals working on similar types of projects. Ideally, establish a square metre rate for the home itself, and then separate out chunks of your budget to cover landscaping, fencing, and external works.

So, you’ve done a lot of work to establish a relevant square metre rate?

If your project does include works to the exterior of your property, including items like driveways, external paths, landscaping, fencing and even a pool, separate out fixed estimates for this bundles of work, and take those out of of your overall budget.

And if the budget you’re discussing is ALL the money you have, then ensure you also deduct any professional fees and approval costs you’ll need to cover.

And then, you should have the budget allowance for the house itself. Divide that by your square metre rate, and you’ll get an approximate allowance for the number of square metres you’re working with.

However, remember your square metre rate is still is only a starting point.

Because your specific square metre rate can vary based on:

• The size of your home, and if the square metre rate is being amortised over a smaller footprint that still includes cost intensive areas such as bathrooms, kitchen, etc
• Any unknowns on your property
• If you plan to increase cost intensive areas (such as an ensuite for every bedroom or a larger kitchen, etc)

Remember that, with renovating, your square metre rate will often be higher than if you’re building new.

This is infuriating for most people planning a renovation. It’s why I use and teach the ‘bolt-on’ renovation strategy, so as to replicate new build efficiencies and capitalise on them to bring down the overall cost / m2.

And if you’re renovating, you’ll need to allocate the square metre rate over any part of the existing home you’re renovating or refurbishing.

If you start cooking your square metre rate right at the beginning of your project, and only allow a lower square metre rate for the works to the existing home, you’ll probably find you run into budget problems down the track. Work on an existing house (even small work) can be labour intensive, and cost intensive as a result.

If you’ve used your square metre rate to identify a number of square metres in floor area to work with … then stick to it.

I’ve seen a lot of clients – and designers for that matter – be given an indication of the size home they should be building or renovating, and then go ahead and design a bigger home.

Or they’ll start breaking down areas into different types of construction (say, garage, outdoor area, etc) to lower the square metre rate on those areas, and try and adjust the total estimated cost overall.

It can give a lot of false information, especially if it’s happening without builder input, or early in your project.

If you’re cooking your square metre rate over your home size and arrangement to try to meet your budget at this point, you’re likely to run into trouble as you start developing the design, and working out your materials, fixtures and finishes.

Your starting budget needs to be as accurate as it can be – but know that the accuracy will be limited at this point

I know it can be incredibly frustrating to be starting a project with ranges of estimates, and an inability to know straight away what your budget will get you. The need for iteration, testing and firming up decisions is a necessary part of your project journey.

And if you’re also pushing the envelope of your home’s size, the inclusions, and the style and overall design, that can push the original budget estimates too.

In my experience, it’s rare that a homeowner fully restrains themselves.

Every client I’ve worked with has always wanted more, and stretched their budget, figured out ways to find more money, waited until they had more money (or more equity in their home) or staged works to get what they wanted.

And they all started with a “this is all the money we really have” conversation too.

And even though I’d always be militant about juggling the budget and design, and showing options to meet the original budget, curbing selections and ideas to keep things on track, the client would usually spend more across the build. Because, we always want more.

If you are starting with square metre rates, then do your very best to understand what they represent, choose a square metre rate that’s relevant to your project wishes and wants, and then let it establish the ground rules to kick things off.

Don’t let square metre rates be the only way you cost the design though. Get better quality pricing input as the design develops, and work to increase the accuracy of your estimates as you go.

It’s going to be natural to discuss things in square metre rates.

Just know it’s only a starting point, but if it’s the starting point that professional fees, home size and project strategy are being set on, then try to make those square metre rates as relevant as possible.

Inside the HOME Method, I talk about other ways to set your budget at the early stage of your project.

And there’s also great information about setting and sticking to your budget inside the mini-course “Set + Stick to Your Budget”.

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If you’d like to get started on your renovation or new build project, my Get Started Guide is a fantastic resource to help you do just that. 

It will teach you the first steps any project needs to take, whatever your dreams, location or budget, and whoever you’re working with. Learn more about it here >>> GET STARTED GUIDE

And, if you’d especially like to get started on your home design, then the mini-course ‘Happy Home Design’ will help you. You’ll learn more about what decisions really matter in happy home design, and how you can design a home that is functional, fantastic and feel-good >>> HAPPY HOME DESIGN