Personal factors to consider
Like any major financial decision, arriving at the right lifecycle costing objective or strategy for your project should start with consideration of a range of personal factors, including:- Current financial situation. The cost of finance options available to you needs to be considered because interest charges on money borrowed will be a significant expense over your time in the home.
- Future financial situation. On the simplest level, this should include how you expect your income to change while you are living in the home and should inform decisions about how much debt you will be able to service in the future.
- Time of life. Upcoming life changes such as having children, children leaving home, or retirement will impact not only your income but also the costs to run your home.
- Location. If you are yet to buy land for your home, it is important to assess potential sites in terms of distance from the places you work and play. While a site further away might be cheaper, transport costs can be significant over your time in the home, especially if your household needs to invest in extra vehicles. In addition to the direct cost of travel, time spent commuting can also have a financial impact by reducing time available to work or requiring you to pay for services such as childcare or housecleaning.
- New build vs. renovation. If you already own a home, a decision to move should include a comparison of options to renovate or extend it against building a new home.
Approaches to lifecycle costing
Before beginning to collect information to determine lifecycle costs for your project, it is important to determine the scope of costs to include. Consider adopting one of the following approaches:
- Full project. This would include every product used in the home along with their associated impacts on operating and maintenance (including replacement) costs.
- Product or system. Focuses on specific parts of the home. For example, assessing the lifecycle cost of a PV system. This analysis can be useful when comparing options from suppliers.
- Solution or outcome-driven. This approach combines products or systems that may be related in delivering an outcome for the project and can give valuable insight into how they work together, for example assessing building envelope options by combining framing, insulation and glazing, and improving energy outcomes by combining products and systems that affect generation and consumption such as PV panels, appliances, lighting and heating systems.
The broader the scope of cost, the more complex the process will be. Engaging a designer who has lifecycle costing experience will be key to making the process as simple and effective as possible.
You will then need to start collecting and recording information to use in the lifecycle costing process. Sources of information can include your design team, published research, product suppliers, and friends and family who have used similar products to those you are considering.
The key information required relates to:
- Expected lifespan of your home. This will be influenced directly by the durability of materials used, the quality of construction, and regular maintenance. It’s also important to be mindful of any potential planning changes that may affect possible uses of the site and cause you (or a future owner) to demolish it.
- Cost to build. Of the costs involved when undertaking lifecycle costing, those related to construction can be estimated with a relatively high degree of accuracy as they will be based on current market costs. It will be important to consider the possibility of material costs increasing (especially if your project takes a long time to complete) and unexpected costs arising such as unforeseen earthworks if building on a challenging site.
- Operating costs. These costs are based predominantly on the future performance of your home. A starting point for estimating these costs is to ask suppliers how their products will perform in your home and request them to provide other projects as references where possible. It is important to remember that each house is a unique collection of many parts and the performance of products can be impacted by site-specific characteristics, quality of construction, the other products in the home, and the way you live in it. As a result, your estimates here are likely to be less accurate than when predicting construction costs. One way of allowing for this is to consider a range of scenarios, for example expectations of low, medium or high performance. This can help you understand how sensitive your final calculations will be to this uncertainty. A similar approach can be taken when estimating future energy and water costs.
- Maintenance costs. The costs to maintain your home include the maintenance of individual products (e.g. painting of surfaces), the replacement of products (e.g. replacement light bulbs or cladding at end of life), and the regular maintenance of systems (e.g. heating or PV panels) to keep them performing as expected. Your product suppliers will be able to supply expected maintenance schedules and costs based on previous use of the products in other homes.
While the costs above can guide homeowners and design teams in considering products and systems used on a project, it is important to note they exclude ongoing costs such as rates and insurance. They also do not account for non-financial benefits such as comfort or health or reduced environmental impact resulting from achieving sustainability outcomes. These can be harder to quantify in the case of an individual home and can vary significantly based on the type of home you choose to build.
Now or later?
In some cases, you may not be able to afford a particular product or system when you are building your home, but future-proofing the building can enable installation when your budget allows. The rising costs of energy and water and the improvement of products and systems that use them can make providing for the future use of sustainable options financially beneficial. During your home’s design process consider these future-proofing options:
- Pre-wiring for monitoring and control systems. Upgrading a house for such technology will always be more expensive once walls are lined.
- Pre-wiring for PV panels. In addition to providing AC/DC cables and room for the inverter, allow for well-oriented and usable space in the roof. You could also provide an outlet to install an electric car charging port in the garage.
- Laying pipes so that a greywater system can be installed once Council regulations allow it. In order to do this you will need to specify where water will be collected from and stored and what you will use it for so that the design matches your requirements.