Build vs. Buy — What's the Cost Difference?

Given today's rising house prices, several clients have considered buying a vacant lot to build their next house. From personal experience, building new or going through significant renovations is incredibly exciting, stressful, and rewarding. If you're considering taking on such a project, here are a few things you should know.

Buying a building lot

• A standard urban residential lot in Halton Hills (40' × 130') will cost approximately $450,000, depending mostly on size and location.

Construction costs

• The "rule of thumb" used for construction costs is between $175 – $250 per square foot (or more) depending on the contractor, size, design and finishings. A 2,000-square-foot home will cost roughly $400,000 at $200/SF.
• Construction costs do not usually include project changes (scope creep), fixtures, appliances, decorating, or landscaping. It is critical to fully understand what your contractor is providing to avoid surprises down the road.
• Be sure your contractor has a change-request process so that all changes to scope — whether instigated by you or the builder — are properly described, quoted and approved. This will ensure you know your budget throughout the build and eliminate billing issues at the end.

Architectural design

• Architectural drawings can be done by a builder, designer, technician or architect. Drawings for a recent bungalow renovation by a local designer were approximately $10,000 including engineer's review and HVAC plan.

Development charges & permits

• Building on a vacant lot (one that's never had a house on it) will likely attract Development Charges. In Halton Hills, a detached dwelling with water and sewer connections costs just over $50,000 in Development Charges.
  • If a structure with water and sewer is already on the lot, the development charges are typically nil.
  • Demolition and disposal costs can be expensive; expect to pay over $20,000 to demolish and dispose of a small bungalow.
• Building permits are issued depending on scope and size of the project and start from $3,200 for a new build in Halton Hills.
  • Additional permits are required from the Region for water and waste-water.

Septic systems & wells

• A septic system and new well can cost close to $40,000 for a rural property assuming there are no complications.

Contingency

• Many builders suggest a 10% minimum contingency in your budget to accommodate scope changes and those inevitable issues that arise in every project.

Putting it all together

You can expect to spend close to $1 million to build a 2,000-square-foot home on an urban residential lot (at least in Halton Hills). Yes, you can save money by doing some of the work yourself, being your own general contractor, building smaller, choosing lower-end finishes, or buying a cheaper lot.

Regardless of what you plan to do, there is no question that the frustrations and struggles of a new build are immense. But after the fact, the joy and pride of walking into a house that you envisioned and designed is unparalleled.

If you are looking for a building lot or thinking of making a move, find a vetted realtor at realtorreferral.ca who specializes in new construction and lot purchases.