Definition

Ok so let’s look at the first component of your construction tender (generally):  the base price.  This is the price of the house ONLY including basic inclusions but excluding site & authority costs as well as other upgrades.

I use the car example a lot as a generally easier and looser analogy.  So imagine buying a base model car and paying the base price.  However if you want the leather seating, GPS navigation, sun-roof, panorama finishing, wheels, steering wheel, etc…; then you pay for that accordingly.  Not to mention that you also have to pay for registration, ensuring it’s roadworthy, insurances, etc…

Every builder has different exclusions in their base package.  Some builders might not include items like doors, eaves, door handles, pantry shelving, etc…  It’s like buying a brand new car without seats.  However these are essential items to building your home and you will be “slammed” later with “upgrades” that should be standard or should have been included in the first place.

Statistic

A lot of builders have their home base prices as low as possible because this is the first thing that most people look at to ascertain value.  In fact, according to a research done by “www.realestate.com.au”, they found that 62% of people select a builder based on the home base price.

Dangers with Base Price

Remember, you don’t build a home paying the base home price.  AND comparing or picking builders based on base home price is a very dangerous exercise due to a number of reasons:

  1. builders already know that you look at base price for comparison – so what most builders do is bring their base price as low as possible to reel you in.  It’s like bait pricing – you will inevitably end up paying a lot more later.
  2. base price is different for every builder – some builders have different inclusions like appliances / ceiling heights / etc…  They may also include slab in the base price and others may not, and so on…
    So when you are comparing, you have to compare like-for-like, otherwise you are just looking at price as a number and going for the cheapest possible option regardless of whether it’s the cheapest or not.
  3. people have this common misconception that the base price is low, then the builder must be cheap or cost effective.  This could not be further from the truth.  Remember, just because they have a low price does not mean that they will be cost effective everywhere else.  It most likely means that because their base price is so low, they have a lot of margin to recover, so everything else will be far more expensive to make up for the margin they are losing because of their low base price.
Finally

Base Price is essentially a result of what each builder allocates in that price.  It’s NOT the final price that you will be paying for your family home or investment.  It’s NOT the basis on which you should be comparing builders.  AND it’s certainly NOT what you budget for building your family home or investment.  Base Price is different for every builder – there is no benchmark for this across the industry!

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