Building a house nowadays, is a decision which entails heavy costs, problems relating to finance and construction, delays in delivery and quality problems, titles, delays on building permits etc. Building a house is an investment decision, which should be studied carefully, as most families built a house once in their lifetime and the final decision in most cases can be irreversible. Below are some general guidelines, which could help the owner to assess the cost of building a house, since small items, which could build up the cost of the house, are usually ignored.
Cost of building plot
Prior to the commencement of construction of your own home, at least the plot should be, or nearly be paid. This will certainly give you an advantage with the financing of the building cost for the house and it is a prerequisite for all financiers. For the transfer of ownership of the plot a Governmental transfer fee of 7%-8% (on average) is required on the market value (not necessarily what you paid for) of the plot.
Cost of the Mortgage & Finance
To register a mortgage, a fee will be paid to the Land Registry Office of about 1% on the Mortgage amount. Normally the mortgage amount is the actual loan %2B 20% on top. You will have to pay the stamp duties and other Bank expenses, which could take the form of once and for all Bank charge (say, on average CYP1000). If you borrow from a bank there is an additional charge of approximately 1.5%-2.0% p.a. on top of the legal base rate of 4.5%. There are now many alternative housing schemes including Life Insurance finance, Co-Op financing etc which extend for 25-40 years and own contribution approximately 20% (usually through term life insurance).
Cost of Architectural Drawings
It is imperative to use a qualified Architectural Office which will have the responsibility for the work done. You should not compromise on this, since the Architect is the most important person in the whole process of building your house. Yes, go to different offices and do discuss fee levels and then make your decision, but always use a qualified architect. Rates are normally around 5% on the total cost of the building and includes the design and supervision. Some architects go up to around 6%-8%.
You will also need to employ a Civil Engineer to carry out the structural design. This cost, with supervision is approximately 1% on the cost of the building.
The cost of the building referred to, includes all items, but not the fees paid to the Authorities and decorative items. So please clear the matter with the Architect, Engineer, etc., what is included is the total building cost.
Cost of Building Licence
The Town Planning Department charges for the issue of the licence will cost you around £300 and for the building licence an added amount of £150-£200.
Cost of the Quantity Surveyor & M/E Engineer
If you wish to engage a Quantity Surveyor for the building, a fee of 1% of the total building cost is required. The cost for a mechanical engineer (for large buildings) is approximately 3%-5% on the cost of the Electrical and Mechanical Budget. Although the use of the above is optional, it is recommended for large and complicated buildings.
Cost of the building
Below you will find a guide of the building costs:
Normal quality house
- CYP500 per sq. meter for the covered area
- CYP150 per sq. meter for the uncovered veranda
- CYP250 per sq. meter for the basement
Good quality house
- CYP550-CYP650 per sq. meter for covered area (depending on quality/facilities)
- CYP180 per sq. meter for uncovered area
Plus the cost of a garage (£3000), water borehole (£1500), fencing and garden (£3500-£4500) for normal plots sizes.
Costs to other Authorities
Extra costs have to be paid for connection to the Water Board, Electricity, Telephone and Land registry Office (demarcation, issue of title etc) estimated at about £1000 in total.
-Total cost/sq.m. for a (250 sq.m.) house
-House 250 sq.m. @ £550/sq.m. £138.500
-Fees and Licences £9.000
-Interest on Loan (say) £6.000
-Other Authorities £1.500
-Garden etc. £3.000
-Sundry other expenses £4.000
-Total cost £162.000 or (£745/sq.m.)
-on top add 15% V.A.T.
The purchase of equipment and installation cost of central heating is an addition and costs approximately £20/sq.m. and for the airconditioning system, an additional amount of approximately £40/sq.m.
A large number of people act as their own contractors for the building and subcontract all the various jobs and supplies of the work. Where the owner is able and with sufficient knowledge and has the time to carry out the supply and coordinating function, there could be a possible saving of 8-10% on total cost. Going further, if “weekend housing” is put into effect (whereby all the family and friends offer themselves as labourers, skilled and unskilled) then the cost can be reduced by 12%-15%. Obviously, in both cases there is the strong danger that the quality will suffer and the time of completion extended.
In recent years, with the introduction of VAT and the increase in labour costs, we have experienced an increase of 7-10% per year, in building cost, a level which is higher than inflation. This has made the building of a house that much more difficult. A house can take approximately 18 months to be completed.
A last item that can cost between 5%-8% in addition, is the right of the Contractor to ask for increase in labour costs and materials prices during the period of construction. Therefore a certain amount for unforeseen costs should be included in the final costing.
Unfortunately in Cyprus we have not reached any stage of prefabrication, whereby sections of the house, windows, doors, kitchens, etc., are prefabricated so that there is a reduction in costs. Also the shortage of skilled labour has created a certain indifference to the quality produced and should always be watched.
The problems related to the building of a house and the related delays have caused the market to direct its interest towards ready houses (a circumstance which did not exist 7-9 years ago). We expect this trend to continue with a positive effect on the value of ready homes.