Architectural Professional Fees

Architectural professional fees vary depending on the complexity of the project, construction end cost, and the individual architectural company own cost structure. Typically professional fees are calculated based on a reducing sliding scale. The higher the project value, the lower the percentage fee. On a project under $1M, typical fee would be at 10-15%, between at $1-5M at 5-10%, between $5-10M at 3-5%, and for projects over $10M at 3% or lower excluding GST.

Development/Project Management Fees

Development / project management fees are calculated based on an estimated construction end cost, length of the delivery program, and the individual project management company own cost structure. Fees are charged as a monthly retainer and the monthly fee can vary depending on the life cycle of the project (e.g. Sketch Design/ Town Planning/ Construction Phase etc). On a project under $1M, typical fee would be 4-5%, between $1-5M at 3-4%, between $5-10M at 2-3% and for projects over $10M at 2.5% or lower excluding GST.

Other Professional Fees

Aside from the architect and project manager, there is a host of other consultants which assist to bring a development project together. The following allowances should be made: on a project under $1M, typical fee would be at 5-7.5%, between at $1-5M at 4-6%, between $5-10M at 3-5%, and for projects over $10M at 3% or lower excluding GST. It is recommended that a developer source individual consultants’ proposal to firm up all other professional fees cost.

Site Acquisition

Prior to any site acquisition, it is highly recommended that a developer undertakes a detailed feasibility study based on an initial yield study prepared by a qualified architect having due regards to local planning guidelines. The feasibility study should adopt appropriate variables including realistic end sales value, conservative development /construction costs, and preferred  profit margin to calculate the right Residual Land Value for the purchase. Do not purchase on a whim, understand your figures.

Development Cycle

A typical development cycle include: 1. Site Identification, 2. Due Diligence/ Feasibility Study, 3. Offer to Purchase/Site Acquisition, 4. Sketch Design, 5. Town Planning Application (inc. VCAT), 6. Sales and Marketing, 7. Secure Pre-Sales,  8. Design Development, 9. Contract Documentation, 10. Construction Tender, 11. Secure Finance, 12. Building Construction, 13. Titles Registration, and 14. Settlement.

Construction rates

At feasibility stage, it is often asked “How much is this building going to cost?”, it is near impossible to answer this as every project is different. Construction price varies depending on the design, construction method, level of finishes and existing site conditions amongst many other variables. As a very general guide, assuming a straight forward architectural design, medium level of finishes and favourable site conditions, it cost roughly  between $240 – $270k excluding GST per apartment to build inc. basement. It is a very good idea to run the initial design concept by a qualified builder or quantity surveyor to get some comfort in construction pricing.

Builders's Margin

The construction price is based on the builder’s actual trade costs plus overheads and profit margin. Similarly to professional fees, it works on a reducing sliding scale and the builder’s margin varies pending on construction end value and the building company own cost structure. On a project under $1M, typical margin would be 10-15%, between $1-5M at 8-10%, between $5-10M at 6-8% and for projects over $10M at 6% or lower excluding GST

Agents Commissions and Marketing Costs

With Off-the-Plan marketing, agents will normally charge 2.75 – 3% for retail sales and 5 – 6max% through the channels with an additional 1 – 1.2% overriding management fee excluding GST. The developer will bare all the associated marketing costs including (but not limited to) brochures, computer renderings, model, print/web advertisements, website and display suite.

Authority Charges

Authority Charges include (but not limited to) all planning and building permit applications, subdivision costs, land titles registration, as well as open space contribution (5% max of land value), power, water and sewer contributions, water tapping, gas, Telstra and NBN. Developers (or their consultants) will meed to make the appropriate application to the relevant authorities to obtain actual charges a it varies from council to council and authority to authority.

Holding Costs

Holding Costs include (but not limited to) bank interests, land tax, council rates, services authority supply and usage charges, property insurances and maintenance costs. When preparing the feasibility, ensure sufficient costs are along and allow for an overrun in case project completion is delayed.

Bank Finance

All major financial institutions assess each project on a case by case basis. Lending criteria varies depending on the strength of the deal and the developer’s experience. Generally speaking, they would lend upto 65% of the net Development Profit (e.g. less selling costs and GST), or 75% of total Project Costs whichever is lesser amount. In terms of pre-sales assume 100-110% debt coverage. We recommend developers to speak to their preferred financial institution to confirm lending criteria and interest margin.

Disclaimer: The information above is provided for general reference only. The information is not guaranteed to be completely accurate and should not be relied upon as such. The Users must make their own inquiries regarding the accuracy of the information. Although the information is provided in good faith, it is also given on the basis that no person using the information, in whole or in part, shall have any claim against Desyne Developments Pty Ltd, its servants, employees or consultants.