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Why Is Custom Building More Expensive Than Project Homes?

Why Is Custom Building More Expensive Than Project Homes?

One of the questions often asked of custom home builders and architects is, “Why are custom home builders more expensive than project home builders?”.

The short answer to this question is that custom homes are unique designs hand crafted to the owner’s design; project homes are design for standardised mass production.  The impact of this difference is not unique to home building. It can be seen in pricing right across the retail and industrial sectors. A tailor-made suit is more expensive than an off-the-shelf suit. A diesel engine designed for one specific installation is more expensive than a standard engine off the assembly line. Whether it is suits, shoes, bicycles, surfboards, engines, vehicles, electronics custom designed and built is more expensive than off-the-shelf.

 


The Difference in Pricing Comes Down to Three Specific Areas

  • Project Homes

Project home builders have standard ranges. Standard designs with restricted options mean that that structural components such as foundation slabs, trusses, beams, frames a can be standardised reducing the cost of design, drafting and engineering.

For project homes builders having a set range of homes is much about cost reduction as functionality.  Design flexibility is traded off for cost savings. Every element of the structural and functional design has been value engineered to minimise costs. Whether it is the thickness of frames and beams, the type of material used, the alignment of walls between lower and upper storeys, everything is examined to wring the last ounce of cost savings out of the designs and their components. That is one of the reasons why project home builders charge so much for making variations.

Project home builders have the advantage of volume. They can negotiate the best rates with suppliers of building materials often in national agreements. Standardisation magnifies this advantage because components can be the same not only within ranges but across ranges. The suppliers can give volume discounts because they can achieve efficiencies of scale in manufacturing and purchasing. The volume benefits of project home builders apply to labour; that is sub-contractors and tradespeople. A volume builder can offer an uninterrupted supply of jobs to their subcontractors, and the work is relatively easy; using standard materials and components and standard construction details. Finally, and most obviously project home builders can work on much lower margins. Their overheads are applied across more projects and the lower profit per job is offset by the number of houses being built.

  • Custom Homes

Custom home builders, like any one creating on-off products, cannot benefit from such standardisation and volume. Every house is designed and built to the home owner’s requirements. Nearly all the components that project home builders have standardised have to be individually designed, drafted, engineered and priced by custom builders. Nor can custom builders gain the volume discounts on building materials.

Labour too comes at a higher cost for custom builders. For tradespeople and subcontractors working on a custom build jobs takes longer. The work can be more complex and varies between jobs. The custom builder will also want higher quality work.

Finally, there is the effort and time of staff to work with clients to come up with a design that reflects the client’s vision for a home and then to create the detailed specifications and drawings. There is also the effort and time of staff to manage the changes and variations that clients make as they proceed from concept design to final contract specifications and drawings. And when a project goes into the construction phase the custom home builder must have a lot less jobs per supervisor than a project home builder because of the complexity and quality of the build process. This means that the custom home builders must have higher margins to cover higher overhead costs applied to fewer projects.

 


The Uniqueness of Custom Home Builders

So, as we stated at the beginning of this blog, we all know that anything custom-made is going to be more expensive and better quality than an off-the-shelf item. The reason why we buy custom products is because we understand that something designed specifically for us is going to better. It is going to meet our own individual requirements. It is going to give us greater pleasure in using it (or in the case of a home living in it). And its is going to be of better quality.


 

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