What your site costs say about you. What are ‘site costs’ and how do they work?

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More often than I’d like, I’ve had clients walk into a display home looking to fit the home of their dreams on the amazing new block they just picked up at an incredible price - only to realise the home won’t fit or that any savings they made on the land purchase are far outweighed by the site costs quoted from their builder.

As consumers we’re price sensitive and when we’re looking at the single biggest purchase of our lives every dollar counts. Which is why consumers can’t be blamed for selecting blocks that have been discounted, rebated or sit under market value.

But not every block is the same – and there isn’t a lot of education in the market informing buyers what to look out for when purchasing land. Mostly, by the time they get to a builder, it’s too late. They own the block. They have to work with it. The compromise begins.

Let’s take a step backward and explain what exactly we mean by ‘site costs’ (or ‘site works’)?

The uninitiated may think House + Land = Package Price. But that isn’t the whole truth. No block of land is the same, and there are costs to build the footings, or foundations, on which your home sits. The most argued cost new home buyers have in the housing game is the site cost amount. Which to me just doesn’t make sense. You wouldn’t build a skyscraper and try to save costs on the amount of reinforced concrete in the basement. Your new home is exactly the same. We want to ensure that your home is built securely, that it won’t move, slide or crack, and that the foundations are going to last you into the future.

There are a variety of factors that affect the amount you are charged for site costs, here are some of them…

Fall
Fall is a reference to how much slope or gradient is on your block. Most builders are looking for less than 1m of fall across your site. This is generally measured diagonally across the building line from corner to corner, taking the highest point as the reference point.

Cut & Fill
When the developer is constructing the allotments, they are looking for the flattest line possible across the entire development. This can mean that some sections of the development have excavation (cut) and others have additional soil laid on top of them (fill). Depending on where your block fits in the development, this can have dramatic effects on your site works costs, as the builder requires dense soil to lay the new home slab and a flat block to do it on.

Rock
Before the builder begins construction on your lot, they will engage an engineer for a soil & survey report. The engineer will drill a test hole on your site to see what lays beneath. If the test shows a rock bed under your block, there may be additional costs added for the rock removal. They will also test the density (or compaction) of the soil to see if additional concrete piers are required.

Trees
Avoid them. Trees onsite (and even trees that have previously been removed from site) leave a root bed. This means that additional piering (deeper concrete pylons) are generally required in and around the tree site to make sure the house doesn’t move as the roots grown, die or change.

Easements (and not just yours!)
Easements run across or adjacent to most blocks. This is where the developer runs your services such as sewer and water. You can’t legally build over an easement (as access is required in the event of a fault and also that it isn’t structurally sound) which means that your house has to be a minimum distance away from the easement lines. Building within a certain distance of an easement can incur additional costs, as piering will need to be done to ensure the home doesn’t move or slide toward the easement.

Be aware that easements on the lots next to or behind yours can also affect your site works if they are too close to your home.

Batter
In some cases, where the block has a significant amount of fall, the developer may choose to batter the block to keep the house pad as flat as possible - meaning the large section of the lot is flat and the front, side or rear of the block may have an extreme incline. There are additional costs that can be incurred if the home is too close to the batter line to ensure its secure. Batter will also affect your landscaping requirements (and costs).

Retaining walls
Like batter, the developer is looking for a flat building surface across the middle of the lot to assist the builder. If the lot is at the low side of adjoining allotments, it may require a retaining wall to secure the dirt from the block next door. Builders will want to add additional concrete on the retaining wall side to make sure, even if the earth moves, the house won’t.

Luckily, most builders will offer a ‘fixed’ site cost amount. The fixed amount means that the builder underwrites the site works cost. For the consumer, this means certainty: that even if the builder uncovers further works required – such as unforeseen rock removal - you won’t be charged another dollar.  It’s a calculated risk on the part of the builder based on a thorough reading of your site engineering drawings, receiving a level 1 compaction report from your developer (which tests the reactivity of the soil on site) as well as an understanding of previous homes they’ve built in the estate or neighbouring estates. Be sure to read the fine print – as not all builders cover all instances when it comes to additional costs.

Wherever possible it’s best for a customer to look for a fixed site cost amount. And, provided your home isn’t built on the side of a cliff with a huge amount of top- soil, your builder should offer this as an option

Bonus: Setbacks, Developer Guidelines and does your home even fit??

On top of the site cost expectations outlined above another important consideration is: does the home I want even fit on the block?

My advice is to speak to a builder before committing to a block of land – even if you don’t end up building with them, most builders will provide enough information to raise any issues you may have with your block down the track – from likely additional site works charges to the ability to fit the home you are looking to build.

Your developer will provide a set of guidelines with your new block at the time of sale. These guidelines will dictate how close to the lot boundaries you can build your home, any restrictions in materials you can use on your home, the height to which you can build, fencing and landscaping requirements as well as many other important factors to be mindful of. You may even get a building envelope plan, which will show you the area of your lot that you can actually build on (note: it’s not all of it!)

Site works are by far the most complicated part of your new home construction, and something that can be easily overlooked. If you’re unsure, ask someone who knows before committing to a block of land. It can save you tens of thousands of dollars down the track.

BY DANIEL SENIA
June 2020

Daniel Senia is a professional sales and marketing advisor, ex-National Marketing Manager and Business Manager for two of Australia’s largest home builders and current General Manager of First Place Building Company. Have a question? Email hello@first-place.com.au