Why Home Build Budgets Can Blow Out: 4 Key Reasons

Building a home is an exciting journey, but one of the most common challenges is keeping the budget on track from the initial design to the final construction stage.

As a builder at Distinct, we highly recommend working with your builder from the initial design stage to try and mitigate this from happening. However, this is not always possible due to a number of reasons.

Many homeowners find their budget spirals out of control, often without understanding why.

​Here are four key reasons why your home-building budget might blow out and what you can do to prevent it.

1. Unrealistic Budgeting from the Start

One of the homeowners' biggest pitfalls is starting the process with an unrealistic budget. Many people underestimate the cost of building a home, focusing on the initial price per square meter without factoring in additional expenses such as finishes, landscaping, or custom design features.

If your budget is too low, you may have to make compromises or face financial stress later in the process. Thorough research and working with builders or consultants who can provide accurate cost estimates early on are essential. This way, you can set a more realistic budget that reflects the true costs of your dream home.

Knowing material prices, labour costs, and potential site complications will help you avoid disappointment later.
​
We find this to be the main reason homeowners' budgets are blowing currently. People base their budgets on the cost of building pre-Covid times, and these are not accurate budgets that will not cover the complete cost of building their dream home.

​2. Scope Creep During Design

Scope creep refers to gradually adding features or changes to the original design, which can significantly increase costs.
For example, during the design phase, you may upgrade your windows from single to double-glazed or opt for premium materials like porcelain benchtops instead of laminate.

It’s easy to fall into the trap of making small changes here and there, but these costs can add up quickly. Larger or more custom-shaped windows, more lighting and feature lighting, or slight modifications to the floor plan can also impact labour and material costs.

It may only be $500 here and $3,000 there, but repeat this pattern 20 times, and there is an added $50k just like that. Adding an extra 1-2m2 per room will add another $15k or so to the job.

To keep your budget under control, it’s crucial to stick to your original design as much as possible and be mindful of how upgrades will affect your timeline and finances.
​
If you do not have the extra dollars to cover these extra features, then just do not add them to the scope. 

​3. Inaccurate or Incomplete Working Drawings

Another common cause of budget blowouts is inaccurate or incomplete working drawings. These are the detailed plans that builders follow during construction. If these drawings miss vital details, like drainage for the garage or the details of where tiles will be laid on the wall in the wet areas, additional costs can arise during construction.

For instance, if the plans don’t account for a drainage system in an area like a garage, adding it later may require costs that were never accounted for in the builder’s quote. This can lead to delays and unexpected expenses.
 
This happens often when the homeowner does not pick up missed items on the plans or specifications and expects something that the builder is not accounting for. The builder's job is to work off a set of working drawings, and sometimes, this is accompanied by fixtures and fitting documents that outline the materials and fixtures that the homeowner wishes to use.  If there are items on those two documents that the homeowner is expecting but are not evident on the documents, then more than likely, the builder has not included them in the scope or the quote and, therefore, will be an added cost to the build.
​
Ensuring that your working drawings, specifications, and finishing documents are accurate and complete before construction begins is vital. Spending extra time on this stage can save you from expensive modifications later. And remember, if it is not on the plans or specs, then it is not in the builder's quote and will be an added cost to your budget.
 

​4. Underestimating Site Costs

Site costs are another area where budgets often blow out, mainly when unexpected challenges arise.
Site works relate to all the works that need to be done on the site that are not related to the build itself. These include ground works to prepare the soil for the slab or any retaining work that may be required for the slab works to start. They also relate to the underground plumbing on site.

Issues like hard rock beneath the surface, poor soil quality, or inadequate plumbing systems can be challenging to predict and may not be apparent until excavation begins.
 
For example, discovering hard rock may require special machinery or additional labour, while bad plumbing can mean redoing underground pipes, which can be costly. These unforeseen site works can quickly eat into your budget. It’s a good idea to allow a contingency fund of at least 10-15% of your total budget to cover these unexpected costs. Additionally, conducting thorough site surveys and investigations before breaking ground can help you anticipate these challenges better.
​
You can perform soil tests on the land before you even start the build to understand what is required from an engineering standpoint and also to see if there may be any potential hard rock issues. 

Conclusion

Building a home in Perth, Western Australia, these days is quite expensive, thanks to the massive inflation we have experienced over the past four years. You only really build a home once or twice in your life, and it will undoubtedly be the most expensive thing you spend your money on. Therefore, you need to ensure you do it right the first time.

By being mindful of these four areas above—realistic budgeting, scope creep, accurate drawings, and site costs—you can manage your budget more effectively and reduce the risk of blowouts during your home build. This will ultimately result in the home you want at, hopefully, the price point you were aiming for.

As stated above, we prefer to work with homeowners from the get-go when it comes to designing their homes.

We try our best to help align your building with your budget. If you are interested in building a home soon and like the idea of working alongside a builder from the start, feel free to reach out and see if we might be the right builder for you.