The economics of building your own home

Published: Sunday | May 17, 2009

Avia Collinder, Business Writer

So, you've decided that you are adventurous enough, brave enough, have sufficient patience - and heartburn medication - to deal with building contractors.

After all, it is your dream home. And opting to build, or more precisely, opting to oversee its construction instead of buying one readymade, offers the chance to customise your 'castle' to your taste and the needs of your family.

Numerous factors, including timing, the right professionals and your management skills, help to determine whether it would work out cheaper than acquiring a house built by a housing developer or even one bought on the open market right now.

Economic sense

To help you decide whether it makes economic sense, Sunday Business turned to the professionals.

A two-bedroom house, which is in the region of 1,200 square feet, will, at today's prices, cost approximately $5,000 per square foot to construct, totalling $6 million, according to Cletus Graham, president of the Jamaica Institute of Quantity Surveyors.

Factor in land preparation, which would be required if the terrain for construction were hilly or rocky.

These are construction costs alone and include a margin for the contractor's profit and overheads.

Other costs include land purchase - budget that at $750,000 to $2 million or more, depending on location; getting a plan done by an architect; and getting the plan approved by the parish council.

Graham explains that developers, especially those who do schemes, can bring in homes at much cheaper prices because of mass production.

"They capitalise on better prices for material and can negotiate with workers for pay closer to the masterbuilder rate rather than choice rate."

A brand new two-bedroom home, with its own title, in Cherry Gardens in St Andrew, will fetch about $18 million now, says Alistair Smith, valuator at DC Tavares & Finson Realty. But it can attract a higher price if it comes with access to amenities, such as a swimming pool, secured gate, and modern finishes, including porcelain tiles and French widows.

Affecting the price as well could be the view and the section of Cherry Gardens in which it is located.

Other factors

Having spent the $6 million building the house, it will be worth about $10 million on the market, but other factors affecting resale price, will include location and demand, which is also connected to location.

The finish, Graham states, is also a factor.

Louvre windows are not as expensive as French windows but will lower the asking price.

Low-cost ceramic tiles will not improve the price as much as high-priced porcelain.

Bathroom fixtures - say a Jacuzzi instead of an ordinary tub - can also tilt a valuation. Then, there is the cost of joinery, which can be as cheap as $4,000, or as expensive as $20,000 a foot.

Building a house ought to work out cheaper than buying a house of the same 'market price'. But, if one does not have knowledge of construction and the workings of the building sector, inexperience can cause costs to be higher, Graham also points out.

Pitfalls include not getting a proper estimate from a quantity surveyor when the house is conceived and not ensuring that architects and engineers are on the job early.

During the course of the construction period, there might be situations which arise which might have been avoided had these experts been overseeing the construction process.

It is very important that professional are involved from conception to execution. A quantity surveyor will help to keep your costs in line. The cost of building materials can swing substantially, depending on the supplier, demand, problems with importing, and the fluctuation in the Jamaican dollar.

The quantity surveyor will give you the best estimate. His fee will be quoted as a percentage of the project cost.

The cost of skilled workers in the construction industry is agreed between unions and masterbuilders every two years. On February 2009, skilled workers received an 18 per cent increase in wages. In 2010, they should get another 17 per cent increase.

Apart from the raw construction costs, you will need to contemplate the matter of finding the right location. The costs to build a 2,000 square-foot home in Cherry Gardens or in a less desirable area, might be the same, but, the market value upon completion will vary widely.

Other professionals in the real-estate industry advise you to be mindful of issues such as the cost of labour.

The low seasons for employment in the building trade can mean cheaper labour, while a sudden increase in housing, or a particular season such as Christmas time, can cause everyone's costs to increase, as remodelling projects and new construction abound.

After the last few hurricanes, most of the able-bodied builders were fully occupied doing repairs to damaged buildings and their rates naturally went up.

Shoddy workmanship can result in your costs increasing tremendously to make the required corrections and ensure the safety of the structure that will house you and your family

Building-plan approvals are also key, but obtaining them from the local authorities can prove time consuming. The delays for building plans to move between the different regulatory agencies, which are not located under the same roof, can delay the approval time.

There is also a need for clear planning guidelines, as what might be requested by one agency might conflict or differ from that requested by another agency, and this will have your architect going back to the drawing board several times.

Also, don't fall prey to keeping up with the Joneses. A toilet for your bathroom can be as low as $3,000 or as high as $30,000 - it all depends on what type of fixtures you want, and how fancy you want your castle to look.

There is also the temptation to make sudden design changes to the building when you are midway through the construction, which can cause massive costs variation. It is always a good idea to build according to your needs and not on what our friends and neighbours have.

  • Breakdown of construction costs on a $6m, two-storey house:

    The estimate of $6 million includes all construction requirements, but these can vary according to the quality of the finishes and the nature of the land on which the house is being constructed.


    a. Foundation 11.1%

    b. Walls and wall finishes 21.3%

    c. Floors and foor finishes 15.2%

    d. Roof and roof finishes 7.0%

    e. Staircase and balustrading 3.4%

    f. Doors and windows 7.6%

    g. Joinery fixtures, fittings 2.9%

    h. Ceiling finishes 3.4%

    j. Sanitary appliances, plumbing 1.4%

    k. Electrical Installation 4.8%

    Sub-total 78.0%


    Drainage, water supply, etc 13.2%



    TOTAL 100%

    Source: Jamaica Institute of Quantity Surveyors

    Rates for Grade A skilled workers - February 2009

  • Painters - $1,964.04 daily

  • Tillers - $2,039.48 daily

  • Labourers - $1,368.49 daily Masons - $2,116.57 daily

  • Carpenters - $2,116.57 daily Steelman -(fixer, bender) - $2,079.17 daily

  • Steelman (erector)- $2,223.34 daily

  • Welder - $2,182.16 daily