Design Process
Total costs of purchasing land and building a house
*Update: Please contact our team for current pricing.
It is common for those of us working in the construction industry to know the approximate costs of a project without needing extensive initial calculations. However, many of our clients are likely unfamiliar with current market prices, leading them to either assume it will be prohibitively expensive or feel the need to visit a firm just to obtain a quote.
In today’s article, we will provide some very basic but useful guidelines for calculating the total costs of purchasing land and building a house.
Before we begin, we would like to emphasize that these figures are based on the prices we set at our firm, Slow Studio. These may vary from other builders, as we include the foundation in the construction cost.
Purchasing land
The first step always involves the processes related to the purchase and sale of land.
Therefore, to understand the total costs of purchasing land and building a house, it is important to know the options available when buying land and which taxes apply in each case, as these will affect the final price.
There are two options: if the purchase occurs between private individuals, or if the seller is a company or agency.
(a) Private individual to private individual – Land price + 10% ITP tax
In the case of a purchase between private individuals, a 10% increase must be applied to the land price for ITP (Property Transfer Tax).
Property Transfer Tax (ITP) applies to the transfer of assets or property between living individuals. Examples of these transactions include the sale of a car, renting a house, or purchasing land when they take place between private individuals.
(b) Company to private individual – Land price + 21% VAT
The second case involves the purchase and sale process between a company and a private client.
Often, we find land for sale managed by a company or real estate agency responsible for handling all the processes and formalities of the property sale.
In this case, if you proceed, you must calculate a 21% increase on the final land price based on Value Added Tax, commonly known as VAT.
Building a house
The next step in calculating the total costs of purchasing land and building a house focuses on all the processes and taxes related to the second part: building the house.
The first value to consider is the surface area to be built in relation to the price.
Currently, an average construction benchmark in Spain is set at €2,000/m2.
Taxes when building a house:
Once we have an approximate cost for building our house, we must increase it according to various taxes.
– VAT (10%)
VAT (Value Added Tax) in this case will be 10% of the total value of the built surface area.
– ICIO Tax (4%)
The ICIO, or Tax on Construction, Installations, and Works, is a tax levied on any construction, installation, or work within the municipality that requires a building or planning license issued by the local town hall.
Essentially, it is a municipal tax on any construction process and amounts to 4% of the budgeted construction price.
– Municipal building license (4%)
Furthermore, the process of issuing the building license by the town hall involves a tax of 4% on the base construction price, which also increases the total costs of purchasing land and building a house.
– First occupancy license (0.05%)
The final tax increasing the construction cost of our house is the first occupancy license, which represents a 0.05% increase in price.
Following our previous example, we will calculate 10% VAT, 4% ICIO, 4% building license, and 0.05% first occupancy license on the €240,000 construction price of our house.
Fees
Next, and also starting from the base construction price according to the surface area, we must apply three fees that will also increase the total costs of purchasing land and building a house.
– The AJD (Stamp Duty) fee for the new build deed, representing a 1.50% increase
– The Land Registry fee, which will increase our base price by 0.43%
– And finally, the administrative agency (Gestoría) fee, which will be 0.16%
Other
To conclude this section on calculating the total costs of purchasing land and building a house, we will add some estimated prices for the installation of basic utility networks and tree felling, if necessary.
– Utilities: Electricity, water, sanitation, and (gas*) = €3,000
* Depending on the type of house we build (ecological, self-sufficient, passive…), we may or may not install certain utility connections.
– Tree felling: €500
** In this area, we consider an approximate base price that can vary significantly depending on the complexity of the land itself. We estimate €500 for land that only requires clearing and cleaning. If trees need to be felled, the investment can reach €3,000 in extreme cases.
Architecture team and contractor fees
Finally, we move on to calculating the prices for what is known as the “Project and technical management,” which includes the architect’s fees, the cost of energy certification, geotechnical and topographical studies, as well as all phases of the architectural project and site management.
– The architectural project and site management currently costs around €25,000-€30,000
– The Technical Architect’s fees would be approximately one-third of the price of the architectural project and site management, totaling €10,000
– The Energy Efficiency Engineer costs approximately €1,300
– The Geotechnical Study would cost €1,000
– The Topographical Study costs €300
– And finally, to the above sum, we would add VAT equivalent to 21% of the final cost.
EXAMPLE OF CONSTRUCTION PRICES FOR 120 M2
If, for example, we calculate the total costs of purchasing land and building a 120 m2 house, we can budget a base price of €240,000 (€2,000/m2 x 120 m2).
Let’s now calculate the total sum of these costs to see the final construction price for a 120 m2 house:
VAT: 10% of €240,000 = €24,000
ICIO: 4% of €240,000 = €9,600
Building license: 4% of €240,000 = €9,600
First occupancy license: 0.05% of €240,000 = €120
AJD (Stamp Duty): 1.50% of €240,000 = €3,600
Land Registry: 0.43% of €240,000 = €1,320
Administrative agency: 0.16% of €240,000 = €384
€240,000 (Construction price) + €24,000 (VAT) + €9,600 (ICIO) + €9,600 (Building license) + €120 (First occupancy license) + €3,600 (AJD) + €1,320 (Land Registry) + €384 (Administrative agency) + €3,000 (Utilities) + €500 (Tree felling) = €292,124
Total for the “Final construction price” section = €292,124
Next, we do the same with the costs for the architectural project and technical management of a 120 m2 house:
€25,000 (Architectural project/ site management) + €10,000 (Technical architect) + €1,300 (Energy efficiency engineer) + €1,000 (Geotechnical study) + €300 (Topographical study) = €37,600
21% VAT of €42,300 = €7,896
€37,600 + €7,896 = €45,496
Total for the “Project and technical management” section = €45,496
Concluding our budget example for the total costs of purchasing land and building a 120 m2 house, we would sum the three parts discussed throughout the article;
First, the price related to the cost of the land with its corresponding taxes.
Second, the construction price based on the built surface area = €292,124
The fees for the architecture team and the completion of the project and technical management = €45,496
The final price for a 120 m2 house will be €337,620
As mentioned, these prices are indicative and can always vary or be further adjusted according to the level of interest and precision required by each client.
In any case, consulting an architectural firm to perform these initial calculations can be very helpful. In addition to providing a more accurate price, they can guide you in calculating the total costs of purchasing land and building a house according to your needs and budget.
At Slow Studio, we offer this service in a personal and transparent manner. You can contact us or visit our architecture studio in Barcelona whenever you need.