How to Prevent Budget Blowout During a Renovation

Time and time again in our line of business, we see people embarking on their dream of renovating their homes only to find they have gone way over budget. We look at some of the best ways to prevent this from happening.

Fuelled by the many reality TV programs that make it look all so easy, over the last few years an increasing number of Australians are doing renovations or repairs of some description to their homes.

Findings released earlier this year from Roy Morgan Research reveal that 62 percent of Australia’s homeowners did some kind of renovations in the last 12 months – up from 57 percent three years ago.

Many of these take the form of minor repairs or painting but 17 percent spent more than $5000 renovating or extending their homes. These are mainly homeowners who have been at the same address for a year or less rather than long-term residents.

And with this increase in renovations inevitably comes budget blowouts. According to a study, 41 percent of Aussie homeowners admitted their DIY project exceeded the original renovation budget with almost half blowing it out by more than 10 percent.

While we might start off with a very clear idea of what we want and the best planning intentions, things can go pear-shaped very quickly.  So how do we stick to (or ideally go under) a budget? The following are five tried and tests steps you can take to avoid the budgeting blues.

5 Steps to Avoid the Budget Blues

  1. Keeping the Project Scope Real

‘Scope of work’ is the term used to describe the basic parameters of a project. You need to write a list of ‘must-haves’ and ‘nice-to-haves’ about what you’d like to do, e.g. remodel a bathroom. Is there anything that can stay, e.g. stained glass windows, mirror? What will you need – new tiling, electrical, plumbing etc? This will help you prioritise the important features in line with an initial budget and determine the scope of work.

Once you have worked out these broad issues, depending on the size of the renovation, you will now need to consult a building designer or architect and lock in plans and costs. It’s best not to skimp on the planning costs and be aware that professionals will inevitably highlight issues that you may not have considered.

Mark English Architects, AIA

  1. Estimate Costs and Don’t Overcapitalise

There are some helpful online renovation and building calculators available from building and renovating businesses that will give you a rough estimate of costs and help you plan. Architects, quantity surveyors and the consumer affairs or fair trading department in your state or territory can all provide helpful advice around the cost of building and renovating. The estimates may give you a jolt but it’s important to be realistic about what you can afford. If you think you’re about to blow your budget, you should review the scope of your project sooner rather than later.

The costs will be variable depending on things like:

  • type and quality of materials
  • the tradespeople you choose
  • the quality of finishes and fittings
  • the size of the job
  • site location.

Be careful not to overcapitalise (spend more on a house than what you can sell it for) so it’s a good idea not to spend more than 5 per cent of the purchase price on renovations. For example, latest Australian Bureau of Statistics (ABS) research puts the average price of a residential dwelling at $679,100 across our capital cities, which means your renovation budget shouldn’t be much more than around $30,000.

The following is a rough guide to renovation costs based on online quoting services:

  • Kitchen – Average size: 8 square metres; Average renovation cost: $12,000–$16,000
  • Bathroom – Average size: 6 square metres; Average renovation cost: $9,000–$12,000
  • New flooring – Average size: 150 square metres (standard 2-3 bedroom home); Average cost: $25–$100 per square metre (depending on material); Average total cost: $3,750 -$15,000
  • Extra bedroom – Average size: 12 square metres; Average renovation cost: $18,000–$24,000
  • Deck or patio – Average size: 9 square metres; Average cost: $180–$900 per square metre (depending on material); Average total cost: $1,620- $8,000.


  1. Watch Out for the Secret Costs

Make sure you do some research into the type of work and costs involved in what you’d like to achieve. Online articles and hitting the library to check out DIY magazines and books are great starting points but you can also tap into friends, family members and neighbours for referrals and an insight into some of the hidden costs and issues. The Government website Your Home also has some tips about renovating a home to improve sustainability.

Despite what you so often see on TV, grabbing a sledgehammer and knocking down a wall to create open-plan living areas is rarely a simple process. If it is a load bearing wall (supports the ceiling) it can be labour intensive to put in reinforcements and it will also require repairs to the floor, ceiling and adjacent walls.

Electrical work is another area that creates unforeseen problems. Be aware that unless they are advised otherwise, builders may only allow for the bare minimum requirements of electrical items in their quotes, e.g. one light and one power point per room – hardly conducive to our modern lifestyle needs.


The following are some other common reasons people experience renovation cost blowout:

  • Upgrades to electrical work, if the house is old and needs rewiring
  • Incorrect measurements, e.g. for kitchen cabinetry
  • Not allowing for the addition of external walls
  • Trying to do repairs and renovations themselves and having to get them fixed by professionals
  • Floor plan changes
  • Choosing more expensive fitting and finishes
  • Unavailability of originally selected material and products
  • Fixing existing work that wasn’t done correctly
  • Structural upgrades to comply with building regulations
  • Costs for corrections e.g. moving plumbing.


  1. Shop Around

You might have really liked the first builder you approached for a quote but even though it takes time and effort, it is important to get at least three quotes from builders or tradespeople. You might be surprised at the cost variations.

Sometimes it is difficult to understand what is and isn’t included so don’t be afraid to ask questions especially around allowances. Allowances include the supply of material and labour to complete the task subject to change depending on the final cost of the item or task. For example, the builder may have allowed $800 for a basic bath but if you want the latest curved freestanding bath for $2000, you will be paying the $1200 difference as an extra, or variation, as they are known. It is important that these allowances are accurate and realistic so that additional costs and variations can be avoided.

  1. Build in a Contingency

You also need to build in a contingency of at least 10 percent for any unforeseen costs. A simple extension to a conventional home may only need a contingency of 5 percent, especially if you are well prepared. However, if you are dealing with a much older property, a contingency of 30 percent may not be enough for an unexpected structural issue.

Preparation is the key to minimising the impact of any unexpected costs, as is working with a designer or builder who is familiar with the type of project you are planning.

If you are interested in buying a residential or investment property with renovation potential, Cohen Handler’s team of expert buyer’s agents can help you find the right property at the right price. Contact us now.

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