Runaway inflation in the building industry outstripping the cost of 7 Star Thermal Performance upgrades

Everywhere you look in Australia in the post-pandemic economy, cost of construction is a hot topic. There was already debate on cost of homes prior to Covid-19 but the subject is now a raging inferno, a pot of hot lave being stirred by politicians who have co-opted the details in an attempt to win favour as though their short sighted ambitions ever achieve much other than adding fuel to fire.

For context it’s important to understand that the National Construction Code (NCC) was recently updated to to NCC version 2022 from NCC 2019. This new national initiative required that energy efficiency be increased from a minimum of 6 stars to a minimum of 7 stars and that a new rating mechanism that’s focused on annual energy budgeting be adopted - this is known as Whole of Home assessment (WoH). Industry review of these changes resulted in much debate and polarisation. As a practisioner of high-performance buildings I’ve watched this topic closely and been involved in discussion and industry advocacy and I’ve been frustrated by the result of lobbying against the adoption of improvements as we’ve watch one state government after another go limp on the issue, delaying adoption of NCC 2022 and watering down the code.

Some designer's may not be in a position to make statements around the cost implications of thermal performance upgrades but I feel confident in drawing conclusions about the impact of the thermal performance specifications within the buildings I design and help procure.

I can say confidently that for my projects, the products, materials and methods which make up the 'high-performance' aspect of the homes which I drive for, have little to no bearing upon the MASSIVE cost increases I've been witnessingin the last 5 years. That is to say that whilst quality windows, thermal mass, choices of materials, cladding and depth of wall framing do have a cost, their cost is presented in my projects early on (much like what's now required by NCC2022 / WoH). (And yes I often seek quotes form window companies as provisions for cost comparison since windows are often the canary in the dirty, hot stinky coal mine).

As I've always sort cost appraisals early in the process I know that these things are not so much of a challenge to the total cost as people fear they may be. I can say that with certainty because the example I gave above of my clients experiencing a 30% price increase in the space of 2-3 months is one of many I've experienced like this in the last 5 years (without changing scope or spec', only adding detail). 

It’s no secret that the cost of building works has risen significantly over the last five years (various links to articles sited below). We know that global heating is affecting how we inhabit buildings to such an extent that rapid and wholesale change is required and hence we can no longer be simply undertaking business as usual. I’ve been asking my constituents to think more deeply about the situation and I think it’s simple to distill the various opposing economic arguments into a brief question about expenditure and value.

Given the large sums of money being spent in construction, when considering what percentage of money should be apportioned to the improvement of buildings from the perspective of thermal performance upgrades, it’s crucial to consider the bigger picture (one which political lobbyists ignore). That is this:

Other than the well documented reduction in cost that’s available to occupants of energy efficient homes, what other values should be placed upon the health and amenity, safety of future inhabitants, social and environmental benefits? What are those very tangible benefits worth to society and what value should we place on them as a percentage of construction cost?  When thinking about that, keep in mind that construction companies work to a profit margin of between 15-25% or greater and that means that if we pursue business as usual, for every $1million spent on glass, metal & concrete, >$150k-$250k is being spent on just 'business as usual'. Is this of any inherent value?

The fear that’s circulated about the rising cost of building being due to improving standards, has certainly been stocked, if not completely driven by building companies and commercial developers who are are evidently unwilling to forego their extensive profit margin's. Instead they’re hell bent on pushing the economic argument to blindside people so we’re distracted from the affect which their profit model has on the real ‘cost of housing crisis’ and focused on ‘the devil’ of their creation.

Put simply, commercial developers have such a phenomenally profitable business model that they'd prefer to spend their time screaming about cost increases than getting on with improving building stock.

As the director of a building design company and someone who continues to advocate for energy efficient, thermally optimised buildings, what I find so deeply frustrating is that lobby groups always use the monetary argument as their weapon of choice to strong arm state governments to submit to their will. The idea being that elements such as better glazing, thicker insulation and thermal mass cost more money and increase the bottom line. The sheer irony is that the proportional cost of additional performance upgrades are hugely exaggerated. In truth those costs are vaslty outweighed by the cost of labour which now, post covid, seems to be THE major factor within rising costs.

The part that pains me so greatly; the cost of thermal performance improvement is used as a scapegoat throughout the industry and this hurts us all. Without improving the base line of the products we manufacture and install or the methods that builders adopt, things which should be standard practice are still considered special, in which case they attract a premium even as they become more common. At every turn there’s push back, even from companies like window manufactures who’d do well to adopt a different attitude - their rep’s keep peddling the same old mis-truths about minimal benefit and ‘beware the cost increase’ when they’re talking about their own products.

State governments like South Australia seem to have adopted the strategy of placating the noisy powerful lobby groups whilst patting themselves on the back for charting a pathway to net-zero (by adopting policies which see the roll out batteries and solar for example). Contrary to popular politics, PV, EV's and batteries aren't the silver bullet to our multi-faceted problems and anyone who says 'they are the singular solution to getting to net-zero' obviously haven't fully considered the carbon dept' those technologies contribute.

So whilst my business supports PV, EV’s and home batteries, and my family and business has fully adopted those crucial technologies, I also acknowledge the complexity of the issues we’re facing.

Technological solutions like installing rooftop solar are broadly appealing but they also tend to create as many problems as they solve and they don’t help to raise the quality of building stock for the lower-socio economic end of the housing market. That strategy then amounts to passing the buck / living in denial and feeling good whilst int he longer term adding global pollution and landfill without addressing core problems. 

Fear of change, of doing better; that’s the most powerful force that’s holding back Australian businesses, our society and our built environment! Playing petty politics is costing us more than the billions spent each year in this sector. Inaction is costing us dearly and it’s robbing our children of a prosperous, safe, stable future.

As someone who works with clients from concept through to construction, often over a 18-24 month period of engagement, the affect of these discussions, of maintaining the status quo is very tangible in terms of the impact on my day to day business. Not only do I have to navigate what seems like exponentially increasing costs with my clients, being ethically forced to tell them to add maybe 20% to their budget to allow for realistic cost increases purely as a result of rising demand, but I have to continually be the voice of reason amongst a tide of misinformation and fear-bating from lobbyists who would have everyone believe that increasing to minimum 7.0 star homes is going to make building companies insolvent. What a load of hot air!

References:

Building costs 37pc higher than four years ago

https://www.afr.com/policy/economy/building-costs-37pc-higher-than-four-years-ago-20240626-p5jotu

CoreLogic’s Cordell Construction Cost Index (CCCI) for Q3 2022 showed national residential construction costs increased at a record rate in the year to September 2022,

https://www.corelogic.com.au/news-research/news/2022/australias-construction-costs-continue-to-rise-at-record-rates

Building Activity, Australia - Reference period September 2024

https://www.abs.gov.au/statistics/industry/building-and-construction/building-activity-australia/latest-release

Normanville home achieves excellent airtightness result (April 2023)

Blower Door Test by Living Building Solutions

The method of airtight building wrap in this case is to wrap the layer on the outside face only, using the exterior face as both the weathertight and airtight layer.

The internal face of stud work can be seen bare without linings during the testing.

We’ve been working with our fantastic client Clare on her home in Normanville since September 2021.

Clare’s brief was for a comfortable, medium sized family home that would take advantage of solar passive design principles to achieve excellent year-round, thermal performance. Focusing on that brief and pairing the design with a mixture of climate responsive materials within a domestic allotment near the sea, initially we’d hoped to achieve a NatHERS rating of close to 7.5 stars. Ultimately with several tweaks during the design & documentation process the home achieved a rating of 7.8 Stars.

As a client who came to the process well researched about high performance homes, rather than just talking about it in a nominal sense, Clare was prepared to meet the challenges of obtaining tangible high performance outcomes. One of the aims was to build a home with good airtightness, hoping to achieve a building envelope that would sustain between 4-6 Air Changes per hour or ACH.

Note: 4-6 ACH is considered to be somewhat ‘easily obtainable’ with some attention to the constructed detail.

Having been briefed on the requirements and the need for attention to detail, 35 South Building Company had the framing and Proclima airtight wraps installed and ready to test by the beginning of April.

Living Building Solutions then undertook testing via the Blower Door Test. 35 South’s crew did a few last minute tweaks, taping joints and blocking up conduits; the atmosphere on site (and the air inside) was thick with anticipation. Whilst the fans spun at high speed, we waited for the results.

Thankfully, the Blower Door Test was a resounding success. At an air leakage rate of just 0.668 ACH it was only a fraction above the PassiveHaus benchmark of 0.6 ACH.

The builders, client and designer all rejoiced with the extremely high level of airtightness achieved and Clare was super happy that the mechanical contractor had convinced her to install a fully ducted Mechanical Heat Recovery Ventilation system instead of the previously quoted, smaller decentralised ones.

The inclusion of ducted MHRV is an absolute requirement in buildings this tight so that decision was serendipitous.

This method of achieving a thermally efficient building envelope is becoming increasingly popular as a way of lowering energy consumption by reducing heat loss during winter and heat gain in summer. In truth, the design contains many elements of a PassiveHaus including high performance windows and thermal insulation including slab edge insulation so it would likely get close to PassiveHaus certification.

35 South can be congratulated for their application of skill in achieving this excellent result.

With the bespoke galvanised roofing, recycled brick, polished concrete and combination of Weathertex and Fine Texture Cladding, we’re looking forward to seeing the finished form reveal itself rather soon!

You can use the form below if you’d like to know more about how we can help you to achieve your high performance home.

A feel good interior for Lifewise Network Care

The nature of commercial interior fitout projects are typically fast paced. This one was certainly short and sweet making it all the more joyful!

During the middle of 2022 our client Ben, the owner of Lifewise Network Care, was considering moving his chiropractic business to a new space in Carrington Street Adelaide so he requested Harmonic Design to undertake a feasibility study for the new premises.

Working closely with Ben to decipher the most spatially appropriate arrangement for his practice, we came up with a preliminary design layout that was spatially ergonomic and strategically effective for his business. Once Ben was confident that this ground floor tenancy was an appropriate location for his consulting room we set about the task of documenting the design for Development Approval and construction.

The design brief called for a warm and comfortable space containing a sense of homely aesthetic appeal and ergonomic functionality; including new reception joinery, shelving, fixed desking, new waiting room furniture and a new ‘ambulent’ toilet for clients.

Our Fitout Plan showing furniture, joinery & finishes.

We assisted Ben in undertaking the fitout of the new interior by provision of design, documentation, tender and some basic construction admin’ such as defects liability. The whole process from design through to construction was delivered over a six month timeframe and Ben was happily open for business in January 2023.

We’ve thoroughly enjoyed assisting Lifewise to comfortably relocate their business. Perhaps more importantly, we get to share in our client’s success as we enjoy our visits to Lifewise for regular mindful adjustments.

We send our heartful gratitude to Ben for his faith in our skills as well as his ongoing support for our family via Network Chiropractic Care.

Furniture & Fabric selections.

We’ve inserted some quick pic’s we took on our phone but we hope to have some better images coming online in the near future.

Some projects are truly a pleasure to be a part of.

This was one of them!

The entry foyer.

New furniture, joinery, flooring and lighting within a newly shaped space.

Fitout by Bradley Trade Services (Mike Jolly)

Carpet & LVT by @millikenfloorsanz and @millikenlifewith_siobhan

Furniture and fabrics selected by Harmonic Design and supplied by @zenithinteriors_ Adelaide and @estilo.furniture.adl

Lighting design by Harmonic Design and supplied by @insight_lighting_solutions / @_inlite_ / @ismobjects

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You can review the project on the website here

Lifewise Chiropractic

Harmonic Design declaration of sustainability + our mission statement

Harmonic Design has formally committed to sustainable development goals via our partnering with SDG Align and Building Designer’s Association of Australia.

You can read about SDG Align’s work here and review Link to our declaration here. We’re using their Ready Reckoner toolkit to track our business’ progress.

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This is an opportune time to clarify our missions statement:

Harmonic Design Mission Statement 

At Harmonic we design buildings which aspire foremost to be sculptural, functional and energy efficient. At every step of the process, Harmonic Design considers deeply the choices of materials, methods, volume and proportion, colours, outlook, ergonomics and comfort that will ultimately be realised within any project. We are inspired by good aesthetics but highly motivated to actualise these with sustainable solutions. 

We attempt to lead projects in a fashion that facilitates a full team of people who are similarly motivated with a passion for the built and natural environment. In that way, we aim to collaborate with builders since our combined efforts produce the ultimate outcomes. 

Energy Ratings (such as NatHERS) provide a minimum benchmark by which performance requirements should be met, however the ratings themselves are theoretical and require a robust process of site-auditing to ensure that buildings are constructed as specified. ‘High’ energy ratings aren't so hard to achieve but truly low-energy buildings are a complex puzzle to resolve.

We're determined to help you wade through the greenwash!

Positive action on energy consumption within new homes. How we can help you verify thermal performance.

Action is occurring on climate change at many grass-roots levels. We’re seeing many facets of public scrutiny that’s bringing about review and action.

With increasing thermal performance requirements forming part of the updated National Construction Code (Circa Sept’ 2022), the industry of the built-environs seem to be in a better position to tackle our #GWP (global warming potential) than one might have expected with the apparent watering down of the NCC 2022. Improvements within #ThermalPerformanceAssessemt certificates have equipped us with teeth, so that we’re ready to capitalise on the perceivable value-shift that’s occurring in relation to energy efficiency.

Not only will new homes be required to be a minimum of 7 Stars but the inclusion of new Whole of Home (WoH) criteria, means all new equipment has to be listed and rated so that fixed home appliances (like hot water, ovens, A/C etc) can be understood in terms of their potential energy savings - or their true NetZeroPotential (#NZP).

The missing link is still the legislative requirements to mandate compliance (via building certifiers and audits), however there are actually inclusions for verification within the updated NatHERS reports – which means NatHERS understands how important it is to put key checking criteria front and centre of key compliance docs.

There’s no government mandated requirement for PROOF of work prior to occupancy (yet) but I think it’s quite exciting and helpful that we have a governing framework to assist us to design for efficiency, then to verify each component has been built as specified.

A page from the the future NatHERS certificate (Adoption within SA, and some other states is delayed or date TBC)

This additional new compliance list can be discussed early in the piece with Harmonic Design and with potential builders, to set expectations of built outcomes in relation to thermal performance and occupational resilience.

Also, thanks to Melanie Lupis from @Sustainability_Certified for showing me some excellent links available through Sustainability Victoria which contain helpful recommendations and verifications frameworks:

• The ins-and-outs of as-built verification

• Insulation and Air-tightness + 

• As-built Verification Factsheet and Checklist

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True Blue Zero CO2

Thanks again also to Melanie Lupis from @Sustainability_Certified for collaborating with Harmonic Design on this award-winning project:

#NZP #NetZeroPotential ……

True Blue Zero CO2 by Harmonic Design with Sustainability Certified

Sustainability Certified and Harmonic Design are keen to share our knowledge and expertise in sustainable design through a variety of upcoming workshops. More news on this in the New Year!

Costs have risen but cost estimating has never been easy. Select your builder wisely!

Pricing is a complex and moving feast, made harder by recent pandemic-pricing. In the custom homes sector it's a question of “How long is a piece of string, what’s it made of and who's managing the production”.

In the initial stages, a client's appetite for understanding the implications of their brief (gold taps?) will set the tone for the project. That's somewhat beyond our control as a designer but to mitigate risk of budget blowout I suggest clients add a 10% contingency to their budget, then work backwards by shaving 10% off their desired building. You can imagine; that goes down like a lead balloon!

Once you're ready to garner a Preliminary Budget Estimate (PBE) the selection of the 'type' of builder will have cost implications. Different builders have different approaches to how they’ll price a project and this 'style' tend to flow through to the way they operate as a managing contractor. 

Broadly speaking, there are two main 'styles' of builders (somewhat true for commercial but definitely the case for residential):

1. Design & Construct / Trade-aligned builders (usually carpenters) who apply their trade directly on the project and then co-ordinate all other trades for the build. These builders spread their time between being on site with a small team and working in the office maybe 1 day a week to manage their projects, materials ordering etc.
   Pros & Cons of this style: These builders are usually highly skilled at their trade, hard working problem solvers and have constant visibility on site which brings some live accountability. However they also tend to be short on time to do the managing. This can lead to poor management since they can be swamped by information, potentially loosing track of important info. Scheduling of work tends to be a bit adhoc and they’re less inclined to 'stick to the programme' or honour the details of the construction documentation, contract etc. They’re less inclined to resolve defects and this leads to the reputation for not 'finishing' a job.
   
   All that being said, trade-aligned builders may be more affordable because they're more attuned to working in the Design-Bid-Build style (Design & Construct contracts). Ie, you design, they cost the job, then depending who’s leading the build process, the detail therein may vary wildly.
   
   Designers often find that we’re sidelined once our documents are handed over. That’s because good design-intent often gives way to ‘value-management’ and decisions are made on the fly without further consultation or proper representation.
   

2. Design, Project Manage & Construct. True Managing contractors tend to spend less time on site (between 2-5%?) but they take their role as "managers" very seriously. These builders are more like facilitators who have a background in a trade but prefer to co-ordinate other trades simultaneously instead of spending their time on site "on the tools". They're almost the opposite of ‘trade-aligned’ builders. These ‘higher tier’ builders also come at a higher cost. Generally you'll pay a premium for any higher level of service and you'll get what you pay for. You'll get better communication, better cost management and hopefully fewer cost variations as well as open communication and an open-book or at least an itemised approach to costing / estimating and charging variations.
   

3. Another term or type is “Volume Builders”. These are generally not interested in bespoke homes since they focus on mass production however some will take on your project. Be aware that ‘volume’ can translate to a lack of quality control so if you elect to use a volume builder for a custom design then discussion and written agreement about the details is important.

Quality of workmanship depends upon each and every trade, where the whole is the sum of it’s parts; so neither style of builder represents a singular guarantee of quality. The major variation seems to be that trade based builders who spend their time on site have more flexibility in their pricing because they have a higher stake in the work, including their trade (typically carpentry). This allows them flexibility in their costs and ability to cut corners, ultimately giving their profits a wider range. ie. they have plenty of scope to "sharpen their pencil".
Sometimes this represents a saving to the client or a builder who’s willing to be a creative problem solver. Other times it equates to additional profit for the builder but it’s hard to foresee which aspects of the project are at risk. I always say to clients there’s three aspects of any project to get right and you should never compromise on more than 1 of the 3:

1. Cost

2. Time

3. Completeness (The detail)
   

So whilst ‘trade-aligned’ builders present a higher level of risk, they may present a more affordable opportunity (albeit more rough-and ready). A Managing Contractor who focusses their time managing contracts will often include more time for co-ordination in the initial stages (engineering, selection schedules & general co-ordination) and this will help things progress smoothly so you'll get a consistent level of service within a more controlled time frame. Such builders may also be working to a higher level of risk/reward. They could be charging 15%, 20% or perhaps even 30% as a profit margin (common during COVID) but they're going to work hard for every cent since their business model is unlikely to benefit from taking short cuts.

So you can see there's basically a big difference in where the accountability lies but in my experience if a client can afford a builder who prioritises project management, they'll bring more ‘sanity’ to a project which is good for all and avoid blow-outs of cost and time.

Paid Preliminary Cost Estimates: It’s now common to find builders charging for their time to undertake detailed pricing so even trade-based builders are diverging into two camps. The older generation of builders are more likely to submit an approximate price to win a client and then invoice price increases as variations when they arise, even if there’s supposed to be a fixed price agreement. These practices are reasonably common but ideally best to avoid. If you’ve taken care to design and document what you want then ultimately you want a builder who cares about the contractual and and design detail and who’s willing to communicate any onsite solutions when they arise so that the design intent is carried through. Worst case scenario, builders may not build aspects of the design ‘as specified’ in order to save money. They might argue this is a saving passed to a client, but it’s just as likely to be profit margin that’s maintained and pocketed by the builder.

Eg. Energy Ratings are a key part of the specification commonly overlooked by builders who think that they’re just red-tape. Instead of recognising the long terms saving which arise from constructing the design correctly / as specified, some will choose to disregard things like the correct glazing type or thermal insulation type which will reduce a building’s thermal performance.

And crucially; what do client's expect in terms of fees and their ownership of the design (like paying fees for planning and building approvals and other consultants). Some clients want to pay one fee for design and expect that the builder will include the cost of all engineering and permits within their total build cost, in which case, the builder become 'king' and the designer is left with little influence over the end result once the plans are handed over.

If clients can afford to pay for the individual services of each engineer, permit etc, their ownership brings added benefits including tendering to an open market. Testing the market once all the information is at hand can expose huge differences in individual trade pricing - that gives opportunity for review and consolidation and if necessary, compromise prior to commencement of building works (instead of shocks whilst building).

Finally, regardless of a builder’s methods, shopping around for builders can also be bad. Try to avoid wasting people’s time. To gain a collaborative environment and garner critical feedback find a builder early on in the process that you can trust. Each project and client is different.

There’s no singular pathway to success so the best outcome in any project is determined by a respectful balance between all three parties. Realistically, the client, designer and builder are equally responsible for a project’s success so communication becomes the most valuable tool in the box.

For further info search for "Types of Construction Contracts in Australia" to clarify terminology like "Design-Construct" etc.