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A Breakdown of Anticipated Building Project Costs

The Cost of Building Consultant Services

When we buy or build a building we need the services of a number of specialists including developers, real estate agents, lawyers, architects, civil engineers, electrical engineers, plumbing specialists, soil specialists and quantity surveyors. Here we look at the consultant services needed and the anticipated costs involved. We also look at how these costs can be minimised saving money in the completion of the project.

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The cost of property is increasing at an alarming rate

When we consider the world of real estate or building we find that these days every city in the world is suffering from rapidly escalating costs be it land, building construction, rents, professional fees, etc.

Everyone is paying more so let us look at what professionla fees we may have to pay and see what you can do about it.

First we need to remember the rule - do not part with your money without

  1. fully understanding exactly what you are paying for and
  2. knowing your money is secure.

Remember that retrieving money from the hand of a person in Indonesia is a surgical operation.

Developers Costs

If you are buying property from a developer it is highly possible that the developer has marked up the building cost by as much as 100%. Developers do have advantages such as large amounts of cash to buy large pieces of land at reasonable prices and are able to take advantage of the economies of scale of bulk buying and multiple construction. Buying an “off the shelf” house can also have the distinct advantage of someone else carrying the stress of the building process but be aware that you are probably paying well over the odds for that pleasure. Quality cannot be guaranteed and you may well find that instead of wrestling for quality with a builder you end up wrestling with a developer.

Real Estate Fees

Real estate agents in Bali, even the more professional ones, are charging very high fees. Expect to pay 5% in real estate fees here while in Australia standard fees vary from around 2 to 2.5%. The high fees being charged in Bali are probably why there are real estate agents springing up on every street corner. Like all new industries that tend to expand as every man and his bull gets in on “yet another idea no one else thought of” no doubt one day the bubble will burst and the real estate industry in Bali will contract back to sustainable levels and the fly-by-nights will give up and go home leaving the more professional operators to continue in a more healthy industry. Word on the grapevine is that land buyers are starting to get few and far between.

Expected Building Costs

If you are building your dream home then there is a lot more to consider.

Most people start by hiring an architect so let us also start there. It is important that you manage your architect, don’t let him manage you. Many people hand over everything for their architect to look after. It certainly saves a lot of worry but you will probably pay handsomely for it. Make no mistake a good architect can make a real difference in terms of the quality of the final design however let us look at their charges.

In the building industry most professionals such as quantity surveyors, structural engineers, MEP design engineers, inspectors, etc. charge for their services by the square meter of floor area of the project.

Architect's Fees

Many architects, however, do not charge in this way. They tend to charge as a percentage of the gross project cost. This arrangement has a major disadvantage, the more the project costs the more they make, there is a vested interest therefore in making the budget blow out (“let slip the bulls of war”). A project being checked in my office at the moment specifies Grohe plumbing fittings throughout, Rp20 million for a single bath tap when I know the customer will be perfectly happy with one costing a still expensive yet far more reasonable 5 million.

Architects in some parts of the world may charge a fee of 10% to an astronomical 20% of the total project cost. At this rate the architect will make a profit of Rp4 million for each and every bathtap simply for writing the word Grohe on the specification sheet! Do I hear the clatter of taurine hoofs on the cobblestones?

By comparison, according to the Architect’s Journal, architects in Britain charge around 6% to 8% of the total project cost while the smaller the project the higher the percentage so typically a US$300,000 (yes I know I am talking the universal language of dollars instead of good old english pounds) project would attract an architect’s fee for full services of 6.9%. While a project of US$100,000 would attract a fee of around 7.9%.

In Australia architect’s fees that are based on a proportion of building cost usually range from 7% to 18% for full services but may be considerably lower for partial services.

A breakdown of Architects costs

To understand more about architect’s fees in Australia a reasonable breakdown of their costs would be as follows:

  • Sketch plans 15% of the total fee
  • Design development 15% of the total fee
  • Contract documentation 35% of the total fee (at expensive Australian draughtsman’s rates)
  • Tender and negotiation 5% of the total fee
  • Contract administration 30% of the total fee (includes inspection of site works, supervision of work, etc).

From this it is possible to work out a fixed price fee which will remove the temptation to spend more. The following table provides a guideline for fixed fees you might pay for an architect’s services.

A breakdown of expected building costs

If we are generous and assume that 12% is a reasonable fee for an average architect then costs per square metre based on the total cost of building four different building qualities would be as follows:

Item % of
V. High
Sketch plans 15% Rp45,000 Rp90,000 Rp135,000 Rp180,000
Design Development 15% Rp45,000 Rp90,000 Rp135,000 Rp180,000
Documentation 35% Rp105,000 Rp210,000 Rp315,000 Rp420,000
Tender negotiation 5% Rp15,000 Rp30,000 Rp45,000 Rp60,000
Construction Supervision 30% Rp90,000 Rp180,000 Rp270,000 Rp360,000
Total fee per sq. m. 100% Rp300,000 Rp600,000 Rp9,000 Rp1,200,000

Draughtsmens Fees

Note that an independent draughtsmen in Bali may charge between Rp100,000 and Rp200,000 per square metre for doing the documentation while from the table above based on an overall 12% fee we see the architect may charge up to Rp420,000 per square metre for the same service. If the architect were to charge an overall fee of 20% then the draughtsman’s costs increase to a somewhat ridiculous Rp700,000 per square metre. The bruised bison are on the move, no wonder we are paying so much.

It is better If your Architect does NOT manage the building project

But then there is another trick up the architect’s sleeve. Many architects work hard to take control of the building process. They may be organising the construction for you or perhaps only administering the tender process. Either way this means that it is possible for the architect to, firstly, engineer a higher building cost and, secondly, negotiate a “finders fee”, perhaps as much as 10% of the building cost, with the building contractor he directs the job towards. This 10% finder’s fee will also attract his 20% markup in which case he is charging you a fee on his own fee. No wonder the price escalates.

We are now paying as much as 32% of the total project cost to the architect. The crippled cattle are running.

Ethical Architects with integrity are reasonable with the fees

I hasten to state that this is the worst case scenario and that most architects do not do this but it is wise to know of the tricks and be aware.

Indeed one of Bali’s most famous and highly respected architects is a wonderful man called Ketut Arthana. A highly ethical man, Ketut advocates that architects should not be involved in the construction process, this is a conflict of interest. He feels that architects should stick to design. He is a man who will always protect the interests of his client. In short he is on your side. It is a good idea to find an architect who is honest, ethical and loves his work, his motivation should be to build beautiful buildings not to drive a big car that makes up for a shortfall in the bodily assets department.

It is also wise to remember that Bali is a buyer's market and that there are more and more architects chasing the business, you have a strong bargaining chip

Finally you may choose to avoid using an architect altogether. I know a couple of people who searched the internet, found designs that they liked and bought full sets of drawings for a price of around US$150. I have also met people who looked around at existing houses, sketched something out and gave it to a draughtsman who put the drawings together. Only recently I came across a couple who designed a dream home for themselves only to have their builder sell their design to another client. The fact is that there is not a lot of mystique in designing a house but there is a lot of creativity in designing a beautiful one.

Professional fees in building projects

In addition to the architect’s fees there are other professional fees you may expect to pay and these will probably be charged by the square metre as follows

  • Structural engineering fees Rp200,000 to Rp 300,000 per square metre
  • MEP (mechanical, electrical and plumbing) design fees Rp120,000 per square metre
  • Quantity Surveyors fees Rp60,000 per square metre

By being careful you can save a lot of money, maybe as much as 10% of the project cost plus the architect’s tender negotiation cost, and a further 5%, simply by handling your own tendering process.

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Copyright © Phil Wilson June 2012
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