Financially Speaking

With house prices rising so rapidly over the last five years, many people are tearing down their homes to build new ones instead of purchasing a new place elsewhere. Starting from scratch will allow you to create your dream abode, but you need to know the costs. Here’s what the experts tell us.

Find the right location

In some major cities where the average price for a detached home is about $1 million, you may have to pay a lot to buy the perfect plot of land. In that case, it could be cheaper to build on an existing property and avoid real estate and land transfer fees. Buying land in a rural area, or a smaller city, could also be cheaper. But, if your plot is in a more remote location, without existing infrastructure, there could be extra costs. A septic system will cost $30,000 to $50,000, a well adds $10,000 to $20,000, and getting hydro connected over what may be a long run is also very expensive.

Find the right style of house

Once you’ve acquired the land, the next step is finding the right style of house. Bylaws may limit how close you can build to the property line, the building’s height and where features like windows can be placed. You can apply for a zoning variance through the city for some of these changes. You may be able to purchase pre-drawn or stock plans for approximately $1.25 per square foot. You can also hire an architect and work from scratch. Architect’s fees for a project can vary from 7.5% to 15% of construction costs.

Know your construction costs

The average cost to build a new house in Canada is about $200 per square foot – meaning a 2,000 square foot home would come in at nearly $400,000. Costs can increase to $300 or more per square foot depending on the lot location, type of materials used, and adding custom interior and exterior elements. Bungalows are the most expensive to build on a per-square-foot basis. The excavation and foundation and the roof and rafters come with high costs, so low, spread-out homes run pricey.

Know your additional costs

If you need a designer to select details such as faucets, cabinetry, flooring, window coverings, furniture and so on, the fees vary from a flat feet to hourly, typically between $100 and $200 an hour. The cost of your dream home really depends on what you want and what you can afford. Set a realistic budget, look ahead to possible extra costs and get firm, signed quotes. Expect some big decisions and a few delays before your dream home becomes a reality. And be sure you have the money you need by talking to your professional advisor.