New analysis from Compare the Market explores the difference between house construction prices and house purchase prices, based on average cost per square metre.

Brisbane had the highest difference among Australian cities between building costs per square metre and purchasing costs. It cost an average of $3,150/m² to build, and $10,027m² to buy. That’s a difference of $6,877/m². Melbourne was second with $2,700/m² to build, and $9,184m² to buy on average, leaving a difference of $6,484/m². Sydney was third, with an average construction cost of $2,500/m² to build, and average purchase cost of $8,789m². That’s a difference of $6289/m².

In comparison to the other cities across the world that were analysed, Australian cities didn’t even break the top 10 when it comes to the biggest difference between the cost to buy and the cost to build a home.

Singapore, infamous for expensive house prices, had the biggest gap between the cost of construction and the cost to purchase a home at AUD$23,681/m². A perfect storm of factors has driven up house prices. There is huge demand from locals and also foreign investors as the population grows in a small island with very little space.

Paris had the second-biggest gap in costs at $16,939, with Amsterdam close behind at $15,154. Paris and Amsterdam also have strong demand but little space for new builds, but they also have desirable historical homes, which means existing homes on the market have an elevated value.

On the flip side, Chicago, Johannesburg, and Portland were the only cities among 36 with cheaper house prices than construction prices.

Chicago had the biggest difference, where buying was $747 cheaper per square metre than buying. Johannesburg was next at $534, while Portland had the lowest difference at $132 cheaper to buy.

While other cities are growing in population, Chicago and Portland are seeing population decline, leading to less demand at a time when construction costs in America are the highest in the world.

Johannesburg, meanwhile, is known for competitive prices but is also home to a wide range of rebates and incentives to help make house prices more affordable.

The cities with the biggest difference in average purchase cost to building cost

Compare the Market’s General Manager of Money Stephen Zeller notes that it’s normal for the cost to buy to be more expensive than building, and building has its own issues.

“Major cities have high demand but shrinking amounts of space for new homes, meaning existing homes on the market typically keep rising in price. There are also other fees like stamp duty that increase the cost of buying property, but it does have its positives,” Mr Zeller explains.

“In contrast, building takes time, and a new house build rarely runs to schedule. There is high demand for skilled builders, and building materials continue to rise in price. It also doesn’t take into account the cost of the land itself, and there are all sorts of other costs that could pop up, like local council approval fees (depending on your jurisdiction).

“You need to ask yourself if you can afford a construction loan on top of your current housing costs (renting or paying off an existing mortgage), whether you really want to build, or if you’d prefer buying a pre-existing house.”

To learn more, visit: https://www.comparethemarket.com.au/home-loans/features/buying-vs-building-costs/

For interviews and more information, please contact:

James McCay | +61 450 930 374 | [email protected]   

Compare the Market is a comparison service that takes the hard work out of shopping around. We make it Simples for Australians to quickly and easily compare and buy insurance, energy, and home loans products from a range of providers. Our easy-to-use comparison tool helps you look for a range of products that may suit your needs and benefit your back pocket.