Analysis also compares Aussie capitals with global cities on the cost of building a home against buying
Brisbane recorded the largest gap among major Australian cities between the average cost of building a home and the average cost of buying one, when measured per square metre, new study by Compare the Market has found.
The analysis compared average construction costs per square metre with average purchase prices per square metre. In Brisbane, it cost an average of $3,150 per square metre to build and $10,027 per square metre to buy, a difference of $6,877 per square metre.
Melbourne ranked second on the same measure, with average construction costs of $2,700 per square metre and average purchase costs of $9,184 per square metre, leaving a difference of $6,484 per square metre. Sydney placed third, with a $2,500 per square metre build cost and an $8,789 per square metre purchase cost, a difference of $6,289 per square metre.
Despite the sizeable differences in the local results, the report found that Australian cities did not feature in the top 10 globally for the largest spread between the cost to build and the cost to buy.
| The cities with the biggest difference in average purchase cost to building cost | ||||
|---|---|---|---|---|
| Country | City | AVG building cost* | AVG purchase cost* | Difference in purchase cost vs build cost* |
| Singapore | Singapore | $3,864 | $27,545 | +$23,681 |
| France | Paris | $2,505 | $19,444 | +$16,939 |
| Netherlands | Amsterdam | $2,472 | $17,625 | +$15,154 |
| New Zealand | Auckland | $2,125 | $15,224 | +$13,099 |
| USA | Honolulu | $5,119 | $14,720 | +$9,601 |
| USA | Los Angeles | $3,593 | $12,560 | +$8,967 |
| USA | San Francisco | $5,041 | $13,506 | +$8,465 |
| USA | New York | $5,424 | $13,287 | +$7,863 |
| Germany | Berlin | $2,004 | $9,656 | +$7,652 |
| Canada | Toronto | $3,692 | $10,628 | +$6,936 |
| Australia | Brisbane | $3,150 | $10,027 | +$6,877 |
| Australia | Melbourne | $2,700 | $9,184 | +$6,484 |
| USA | Miami | $2,982 | $9,294 | +$6,312 |
| Australia | Sydney | $2,500 | $8,789 | +$6,289 |
| Hungary | Budapest | $2,505 | $8,506 | +$6,001 |
| Source: Compare the Market * AUD/m2 | ||||
Singapore recorded the biggest gap among the cities assessed, at $23,681 per square metre. Compare the Market attributed the result to strong demand from residents and foreign investors, alongside population growth and limited space.
Paris had the second-largest gap at $16,939 per square metre, with Amsterdam close behind at $15,154 per square metre. The analysis pointed to strong demand and constraints on new supply in both markets, as well as the higher value placed on established and historic housing stock.
In three cities — Chicago, Johannesburg and Portland — the analysis found it was cheaper to buy than to build. Chicago showed the largest negative difference, where buying was $747 per square metre cheaper than building. Johannesburg followed at $534 per square metre, while Portland had the smallest difference at $132 per square metre cheaper to buy.
The report linked the Chicago and Portland outcomes to falling populations and weaker demand, alongside elevated construction costs in the United States. In Johannesburg, it cited competitive pricing and the presence of rebates and incentives designed to improve affordability.
Stephen Zeller (pictured right), Compare the Market’s general manager of money, said the gap between building and buying was not unusual in large cities, but buyers should account for the trade-offs.
“Major cities have high demand but shrinking amounts of space for new homes, meaning existing homes on the market typically keep rising in price,” Zeller pointed out. “There are also other fees like stamp duty that increase the cost of buying property, but it does have its positives.
“In contrast, building takes time, and a new house build rarely runs to schedule. There is high demand for skilled builders, and building materials continue to rise in price. It also doesn’t take into account the cost of the land itself, and there are all sorts of other costs that could pop up, like local council approval fees (depending on your jurisdiction).
“You need to ask yourself if you can afford a construction loan on top of your current housing costs (renting or paying off an existing mortgage), whether you really want to build, or if you’d prefer buying a pre-existing house.”
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