What Are 'Fixed Site Costs' Compared to 'Cost Allowances'?
Site costs are one of the largest ‘hidden’ fees when it comes to building a house. As such, it is important to understand the difference between ‘fixed site costs’ and ‘cost allowances’.
Site costs cover anything that are not included in the base cost of building a home. They encompass a broad range of factors, which can be divided into two categories:
- Site Infrastructure: these are mandatory requirements, such as building permits, soil tests, temporary fencing, and insurances.
- Site works: these are the physical works needed to prepare your building site for construction work, such as levelling out the site so the foundations can be poured, removing rocks and trees, installing retaining walls to protect the site, and installing services like power and water.
If your building contract includes fixed site costs, all the items above are allocated a specific, locked-in price. If your building contract includes cost allowances, all the items above are allocated an estimated price, which could vary depending on several circumstances.
Given the broad scope of activities that fall under the heading ‘site costs’—and the even broader range of variables that can impact the price tag—it is vital to discuss the topic with your builder as early as possible. Wherever possible, ensure that your building contract offers fixed site costs, rather than cost allowances. This way, you will understand exactly what you are committing to from the beginning, avoiding costly surprises during construction.
One of the most effective ways by which to ensure fixed site costs is through an accurate, detailed soil test and site survey. Once armed with all the information from these tests, it should be much easier to lock down fixed site costs. Keep in mind that if you are undertaking a ‘knock down rebuild’ project, you may need to conduct a soil test and site survey both before and after demolition of the existing property.