How much does it cost to build a house?


We are often asked about cost and the reality is that there is no easy formula to determine the cost of refurbishing, extending and/or building. We’ve all heard the old maxim of £1,500 per square metre but there are many variables to account for when estimating cost and for a new build, architect-designed home in London or the South-East, one should reasonably expect a construction cost closer to £1,750 per square metre, plus land acquisition and professional fees.


A new home may cost more


Any of the following matters could increase project cost and the likelihood is that a few of these examples are relevant to you, rather than one single issue. Indeed, for new build homes in the Essex area it is likely that several of the below apply and therefore, a minimum of £2,000 per square metre could be a more realistic estimate for your project.


  • Constrained site - party walls and/or site organisation issues add layers of complexity to the project, which may in turn create difficulties for a builder.

  • Difficult site access - is the site to the rear of a terrace, or accessed by a narrow track or mews street?

  • Parking - are expensive permits required to park vehicles or skips outside?

  • Foundations - are specialist foundations such as mini piles required to reach stable ground? Is underpinning required to the neighbour’s foundations?

  • Superstructure - simple block and brick cavity walls are cost effective because London builders tend to be familiar with them, although they are slow to build. Non standard forms of construction will often attract a premium. Cross Laminated Timber, for example, has many advantages in terms of environmental impact and construction speed, yet it can still increase total costs by around 10% for a new home.

  • Postcode pricing - a competitive tender situation seeks to provide best value for the client, yet contractors may still price higher in certain boroughs.

  • Glazing - large glazed areas will cost significantly more than a standard wall construction with more typical windows.

  • Kitchen specification - is a brand name kitchen required? £50k or more for a brand name kitchen may not be a worthwhile cost, when £15k might well be sufficient for bespoke item with standard carcasses and good external finishes.


Factors that can affect residential build costs are many, and it wouldn't be improbable for costs to reach £4,000 per square metre if you are seeking high-end finishes or indeed, if you wish to add a basement for instance. To be clear, the costs given above are a guide and relevant to construction only.


Additional cost considerations

When considering the build process, it is essential to be mindful of additional costs.

  • Finance costs - can vary depending on the amount of loan required and the loan as a percentage of the total build cost. Possessing a large cash sum to contribute will enable you to take advantage of lower borrowing rates but conversely, if you require 100% borrowing for both land and build costs then the number of potential lenders will reduce and interest rates increase. 100% loans are usually released in stages when required, with only the sum needed to buy the site released primarily.

  • Site purchase cost - will undoubtedly be determined by the size and location of a plot. Yet there may be other variables at play, such as planning status, that can have an impact. For instance, a plot carrying planning consent for a house will be more expensive than the same plot would be without approval, and for good reason. There are risks associated with buying a plot without consent but there are also considerable rewards - an uplift in value. In such instances it may therefore be prudent to offer on the basis of ‘subject to planning’ as a means of reducing the buyer’s risk. This may also benefit the vendor, enabling them to achieve a good price for the land.

  • Buying costs - solicitors fees, survey fees and Stamp Duty Land Tax.

  • Consultants fees - fees for all consultants will vary depending on the size and complexity of the project. Remember to allow for an architect, structural engineer, services consultant, approved inspector and a party wall surveyor.

Tax Benefits for new build houses

When considering the build process it is essential to be mindful of additional costs that can often be forgotten.

  • Stamp Duty - comparative to stamp duty relevant to buying an existing home there is a saving when purchasing a plot of land. This is owed to stamp duty being calculated on the land value only, which is considerably less without a house already on it. Should the new build be intended as a second property then potential savings are increased due the higher SDLT rates applicable to second properties.

  • VAT - is not payable on construction costs for new build houses, although the property must qualify as a “genuinely new, self-contained house or flat” to be zero-rated. Further details can be found here, and it should be noted that VAT remains applicable to consultant's fees.

  • Capital Gains Tax - only becomes effective when the property in question is not your principle private residence. In such instances, capital gains tax will not be paid on any profit when your new build property is sold.

Is profit possible?

Over the years Kevin McCloud has done much to ignite Britain's passion for building a 'grand design'. But in the present climate the reality is that land is scarce in and around London certainly, and increasingly more so in Essex. That fact in itself has lead to the very real probability of paying more for land than the cost of building a house. However, it remains possible to realise a profit from building a house, although margins as a percentage of the overall costs may be smaller.

The main driver to building your own home is ultimately the possibility of owning a bespoke item rather than one purchased from a proverbial shelf and there are additional benefits such as sustainability. The fact is that building a new house to a high standard (such as Passivhaus) is more straightforward than it is to retrofit an existing home and the rewards are highly insulated, comfortable, draft free spaces with the benefit of dramatically reduced energy bills.

Further Reading

How much does a Planning Application cost?

How much do architects cost? How are fees calculated?

How much does a house extension cost?

Studio Forty

40 Pauline Gardens  Billericay  Essex  CM12 0LB

01277 650730

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