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Does anyone have a “rule of thumb” ratio for the cost of labor vs the cost of materials in residential home construction. These exist in the US market but I’ve seen no info on-line. I realize the per square meter cost varies according to locale and quality of materials, just looking for a guideline for a $700 to $1000 /sq meter home of roughly 200 to 250 sq meters.
My architect and others have said that the construction cost of a home is about 80% materials and 20% labor. The costs of architects’ and engineers’ fees, workers’ compensation insurance, permits, etc will skew that ratio somewhat.
The 80% materials / 20% labor ratio seems roughly right to me, but several other factors can affect that.
1. where you’re building. If you are far from suppliers, it may or may not up your labor cost, but you could spend more on transport than on certain heavy materials.
2. your builder’s skill at controlling the cost of his subcontractors.
3. your skill at controlling the builder’s pass-through of overcharges by his subcontractors if he is unskilled at negotiating with them ahead of time.
4. your attorney’s skill at fighting through the contract process. The builder wants it open ended so you take all risk and hassle. You want it closed, specifically locking down every imaginable cost. If “extra unanticipated retention walls” are a huge profit center for the builder, you can bet you’re going to have massive needs for retaining walls. If your attorney hasn’t negotiated and crafted serious construction contracts, then don’t let him touch the contract. Go find someone who will add value. Basically your build cost could go from $700 to $1200 per meter if you don’t have some control over “extra” excavation, retention, concrete ground cover, roadwork, electric wiring, dirt movement, and so on.
If you’re too good at negotiating,and the builder realizes he is going to lose money on the project, there’s the risk he’ll walk away and leave you hanging. You must keep the upper hand financially. Avoid a contract that forces you to pay by DATE. Pay by benchmarks, but pay fast when you are supposed to, so you don’t wreck his business operation.
Get involved with the materials purchases, the selections, the more hands you are, the less chance you’ll pay $150,000 for no meters of construction. (as in, “my contractor’s phone has been disconnected…”)
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