How much does it cost to build a single-family home?

Building your own house, the villa of your dreams, to your liking, is something that many people aspire to, but do not make a reality due to the complexity of the process.

The lack of familiarity with technical and legislative processes and market prices turns this dream into a nightmare for those brave enough to take on such a herculean task.

As if all this was not enough, there is also economic uncertainty. You never really know how much things cost. You never know if everything you need is included in your budget or if you have all the necessary paperwork to live there.

Let’s start with a figurative assumption of a 180 m² house on a plot of land in a residential area. At the end, we will make a summary of the costs according to this calculation.

There are many concepts to consider and, to make our answer as clear as possible, we are going to begin, figuratively, with the foundation of the process, which is land acquisition.

1.- Land purchase

Above all, the price of the land will depend on such plot characteristics as: the square meters, location, town planning qualification, technical parameters, etc. (see “The three keys to choose a plot of land to live on”). The cost of the land represents a very important expense which can be between 30% and 40% of the total investment, although from our market perspective we always recommend that the cost of the land never exceed 1/3 of the total investment.

Before buying the land, our next recommendation would be to familiarise oneself with the importance of its urban and legal characteristics. Such information will be provided by the Town Planning Department of the Town Hall where the land is located. Don’t forget to request a “nota simple” from the Land Registry to check the deeded surface area, charges and easements. You must make sure that the land is considered viable for construction and has the status of a vacant plot.

To this cost you will have to add the Transfer tax (ITP)which is 10%, or VAT (21%) depending on whether you are a business or a private people.

2.- Notary fees and financial costs

The notary will become a figure that will accompany you throughout the entire process, and every time you visit him you will incur additional costs. In addition, you will have to register both certifications with the Land Registry: the purchase of the land and the completion of the building work. Bear this in mind if you are financing through a mortgage.

The notary and registry fees are stipulated by means of tariffs established by law. The total of both fees is around 0,5% of the property value (or the mortgage liability) plus the well-known Stamp Duty (AJD), which is 1-1,5%. On the financial side, it is necessary to take into account the bank’s interest rates, in addition to the commission charged for opening the mortgage account (0-1% of the loan amount), which depend on the mortgage subscription conditions. To all this, we should add the valuation costs, which depend on the characteristics of the property, the land and can fall in the 350-450 € range.

The notary, registry and the valuation appraisal fees will be subject to the corresponding VAT, which is currently the highest type of tax imposed (21%).

3.- Technicians

The Law of Construction Planning (“La Ley de Ordenación de la Edificación”) establishes the different agents involved in the building process. Among them are the technicians, like topographers, geologists, architects and technical architects, all of whom are necessary for the different phases of the project.

Topographical study: this provides the physical characteristics of the plot, that is, the real surface area of the plot. It never hurts to have a topographical report carried out before purchasing the land, in order to check that the square metres that you are being offered are the same as the square metres that you are actually buying. The cost of this study will be around 750-1,000 € for a plot between 500 and 1,000 m².

Geotechnical study: this provides us with an assessment of the stability of the land and the depth of the foundation level for our building project and it is advisable to have it approved by the competent official trade association. This document is compulsory for any construction or building project. This study will cost around 1,500 € for a single-family home with a surface area of no more than 400 m².

The architect is the main figure in the process of planning the building project and ensuring its successful implementation on the land. The architect’s fees vary depending on the complexity and surface area of the home and can be around 3-6% of the material execution budget (PEM), which is the amount of the cost of the materials and labour costs necessary for the execution of a project. This percentage is only an estimate, and there are professionals who assess their fees at percentages higher than 10% of the PEM. Such fees usually include the basic preparation of the project and the execution of the project, both of which are approved by the corresponding architects’ association, and the project management.

Technical architect is the most senior person responsible for the building work during the execution phase, he is the safety and quality control coordinator for the construction work. Similarly to the architect, their fees for all these functions will vary between 3-6% of the PEM.

All these costs are taxed at 21% (VAT) as they are treated as professionally incurred costs.

4.- Licences and insurance

In order to start building, a planning permit must be requested from the corresponding local municipality, with the aim of checking that the project complies with the municipal regulations, as well as proceeding with the self-settlement of the tax on constructions, installations and works (ICIO).

Prior to the concession of the licence, and in order to begin the work, a deposit must be made at the Town hall, to guarantee the correct management of the waste derived from the building process, as well as the conservation of the pavements and public roads that could be affected by the construction project.

You should consider that in addition to being the owner, you are also a private developer and as such you should take out civil liability insurance for all construction risks.

Finally, we recommend taking out a ten-year insurance policy in order to guarantee the finalization of the project. For this, the reports issued by a Technical Control Body (OCT) that verify the entire building process from inception to the handing over of keys, are necessary. This insurance is only compulsory if you want to sell the house within 10 years of its construction.

Please, note that neither fees nor taxes are subject to VAT.

5.- Construction

The construction is the most important part and will represent almost 80% of the total global budget (without including the cost of the land).

The budget for the construction of a house depends mainly on the total surface area and on the building specifications of the house. We also must distinguish the PEM, which includes other costs such as technicians’ fees, the licence and the construction tax, from the contractual implementation budget  (PEC), which is the builder’s budget.

We are sure that in many forums and websites you have read that the price per square metre for the construction of a single-family house is around 800-1,000 € per square metre. This valuation is not inaccurate if you really understand that it corresponds only and exclusively to the cost of construction, without considering the rest of the costs that we have mentioned earlier in this post.

6.- The final stage of the building process

In order to enjoy your home, you will still have to pay a few more bureaucratic euros:

The first occupation licence fee, where they check that the works are in accordance with the project, adjusting, upwards or downwards, the ICIO. It depends on each administration.

The occupancy certificate, which serves to verify compliance with the conditions of occupancy of the property. It depends on each municipal administration.

Finally, the registration of water, electricity, gas and telecommunications supplies. There is an unwritten rule of 200, which is 200 € for each supply, but until the licence has been issued, the project and the technical details of the property are sent to the supply company, the exact amount of this concept is not known.

With all these variables, it is very difficult to give an exact answer to the question “How much does it cost to build a home?” It is therefore essential, in order to bring the project to a good conclusion, to have a desire to know about all aspects of the project and the related budget needed. This uncertainty is what personalHOME eliminates altogether with its TURNKEY – CLOSED PRICE. No fine print.

Visit our website and contact us for personalised, high-quality service. We would be delighted to get to know your dreams and help you to make them come true without any burden nor surprises.