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Why are custom homes more expensive?

1st Oct '22 • By

Deciding on the particular home you wish to own in the early stages is significant. There are two types of homes that you can choose from: a production home or a custom home. A production home features a similar design of homes constructed within the neighbourhood, while a custom home has a specific design and floor plan as per the owner’s preference.

Be aware that a custom home does not come cheap. In many instances, you have to acquire a piece of land to build such a home. In addition, the whole construction process of a custom build from start to finish comes with extra costs. We explore the main reasons why custom homes are expensive and whether they’re the right option for your goals.


Article Summary

  • Buying land
  • Hiring architects
  • High costs of construction

1. Buying Land 

As mentioned above, setting up a custom build might require you to acquire new land, depending on your location. Suppose this is the case; you will have an additional cost of acquiring the land. You’ll also have to pay surveying fees. On the other hand, if you already own land and want to start building, this would reduce the cost. 

Remember you’re starting from scratch; therefore, you have to pay an additional cost to ensure new utilities are in place on top of acquiring the land. They include electricity, water, sewage, gas, and cable, for example.

Buying a ready-built custom home might be relatively cheaper compared to building one, but still more expensive than a production home. However, buying isn’t suitable for you if you need specific custom features. 

Other things you might need to address on new land are excavation services to enhance topography, and setting up the drainage on/off-site.


2. Hiring Architects

Architects are not always necessary, even for complex house designs. For instance, if you’ll be working with a contractor for your custom home project, you might not need an architect since they may have their own building designer or architect. 

However, other factors might lead you to hire one, such as if your local authorities require you to have a drawing from an architect. In this scenario, an architect will charge a higher fee for a custom design depending on their experience and the complexity of the drawing. Generally, architects may charge approximately 10% of the final cost of an entire project. However, the prices vary depending on your location, type of services needed, and your negotiation skills.

3. High Costs of Construction

Since you’ll be constructing a home with specific designs that meet personalised aesthetics and functionality, it will cost a significant amount of money. Additionally, the project duration of a custom home is relatively longer.

It’s hard to determine the exact cost per square metre for custom build due to a number of variables such as design, materials, and location. However, the general rule is that it’s likely to cost twice as much as a production home. Find out how much a builder costs


Let’s explore various aspects that affect the cost of construction: 

  • One aspect that brings about the increased cost of building a custom home, as highlighted above, is hiring an architect. They charge about 8% to 15% of the total construction cost as a fee. Building experts estimate the average custom home costs from $350,000 up to $1.5 million. So, you can estimate how much you’re likely to pay when you hire an architect.
  • Specification of the custom home brings about an increased building cost. It’s not surprising that you find a large and basic home costs less to set up while a smaller home with a luxury standard can cost millions to build. It’s not about the size but the scope of the specification. It also boils down to using specific materials for the project. The more custom materials used for a project, the higher the cost. Additionally, custom homes tend to have luxury finishes that are expensive to purchase and install. Some of the finishes that require large sums of money include floors, mouldings, cabinets, lighting, windows, and countertops. If you’re into a more comfortable custom build, you might opt to have some systems in place. They include an HVAC system, smart home technology, or a thermal wall system, which are also not cheap. 
  • Lastly, building an amazing custom home requires you to hire custom builders with the skill and knowledge to construct it to an exceptional standard, which isn’t cheap. So, how much does a custom builder cost? The average cost is at least $80 per hour. However, it might be higher depending on the complexity of a project. Additionally, other builders offer fixed price charges. Considering that constructing a custom build is time-consuming, you expect to incur an increased construction cost, especially if the builder charges on hourly rates. 

As custom builds are more expensive, you need to consider multiple builders quotes to select the one that is right for you. 


Are Custom Homes Worth it? 

Regardless of custom builds being more expensive than a typical production home, it has many benefits. Building a home based on your personalised design and custom specifications brings about personal fulfilment as a homeowner. 

Someone who owns a typical home might in the future renovate or sell it to acquire a new home that suits their needs. On the other hand, a custom homeowner saves a lot in the long term since they already own a build that aligns with their needs and taste. 

If you dream of a specific home design, then a custom build is the choice for you. However, it requires having enough money to construct one depending on what exact build you desire. 

Further Reading


*All the costs quoted were sourced at the time this article was written. They are to be used as an AUD cost guide and may vary locally, and are subject to market changes.

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