How much does it cost to build a new house?

Obra Nueva Mallorca

How to estimate the cost of building a new house in Mallorca

Are you planning a house project in Mallorca? Building a house is a big investment, and it can be a challenge for an individual to calculate the estimated project cost. Apart from construction costs, it is necessary to take into account a series of professional fees, and project and license expenses.

We often talk about the cost per square meter of construction; however, this cost will only include materials and labour. You will have to make some more extensive preliminary calculations, as it is more relevant to know what the cost of the entire project will be, or the cost per square meter including all the expenses. al the expenses. Do not forget to include project expenses, architects, topographic plan, geotechnical survey, notary, fees, taxes… these are expenses that can represent a significant cost within the total budget.

To know the cost of a housing project, one of the most important rates to consider is the Material Execution Budget, PEM (Presupuesto de Ejecución Material). It is a calculation by the architect, for the estimated costs of construction, including all the costs to execute the work; materials, labour, installation, etc. It is based on the characteristics of the house, for example, the location, the qualities of the materials, the design, if it is a detached single-family house or a terraced house. However, these build rates (PEM) are actually lower than the real costs of construction, and are primarily used to calculate the architect’s fees, as well as the license fee and some of the taxes.

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10 costs to consider when building a new house in Mallorca

You have your plot of land and you are planning to build the house of your dreams. Here is a summary of some important expenses to consider when building a home. The professional fees are unregulated and each professional establishes his own, however, professional associations give an approximate price. On top of the project costs and construction management, as well as geotechnical surveys, a 21% VAT will be added.

  1. Before starting the project, you must hire a technician for a topographic survey. The topographic plan exposes the characteristics of the site; the situation, orientation, surface, ground levels, access roads, etc.
  1. It is necessary to have a project before starting any new construction. One of the first steps when building a new house is to find the most appropriate architecture studio for your project. The architect is the professional who makes the design of the house, and develops a first proposal, the Basic Project, and the Executive Project. Normally he or she is also in charge of the construction management. In general, architects charge between 7 % and 12 % of the PEM.
  1. A geotechnical survey is an evaluation of the condition of the surface, soil and resistance of the building site, and it constitutes the properties on which the entire building will be calculated. The rate depends on the size and inclination of the plot, the number of surveys to be carried out, etc.
  1. The technical architect, or surveyor, is the director of the execution of the project and who is in charge of the supervision during the construction phase. He or she controls the correct execution by the builder, of what is projected by the architect. Normally it is also the person in charge of the “coordination of safety and health”. The cost represents around 5 % of the PEM. If you want to know the difference between an architect and a technical architect, you can read our previous post Drawer of dreams.
  1. The Building License fee is a tax paid to the local Town Hall, and will be around 2 to 3 % of the PEM. Upon having the license, you will have to pay the ICIO, the Tax on Constructions, Installations, and Works, approximately 4 % of the total budget of the construction (it is based on the PEM-rate, but might be adjusted to the real cost in the post construction review).
  1. The budget quote from the construction company, that coordinates and executes the construction, will be the highest cost of your project. The Contractor’s execution estimate is based on the Execution Project and the building plans, and it includes the price of materials, labour, overheads, and the builder’s profit. and it includes the price of materials, labour, overheads, and the builder’s profit. If you are a self-promoter, building your own home for personal use, you will only pay VAT of 10% on this budget. A promoter, who aims to earn money, must pay a VAT of 21% on the contract budget.
  1. Taxes for waste removal from demolition and construction. The architect makes a study to estimate the cost of managing the construction waste, paid by the property owner through a deposit. The cost can vary depending on the type of construction that is made.
  1. It is mandatory to contract the services of OCT, a Technical Control Body (Organismo de Control Técnico) and a Ten-Year Damage Insurancewhen selling a house during the first 10 years. In case you build your own home it is not mandatory, though recommended, and to be able to sell within those 10 years you must have this technical control of the construction works. For more information you can read this basic guide.
  1. Once the construction work is finished, the services of a public notary will be necessary to legalise the home; for the procedures to obtain the Licence of First Occupation, Deed for New Building, register the home in the Property Registry and pay the corresponding taxes. You have to calculate about 2-3 % on the value of the house. If it is necessary to make a Horizontal Division of the land, add another 1.5 % of the total cost of the construction work.
  1. 10. You have to request the final Certificate of Final Completion to be able to process the Certificate of Occupancy, necessary to contract the supplies of water, gas, electricity, telephone, etc., calculates about 300 € per supply.
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Apart from these expenses, the cost for the acquisition of the site must be taken into account, and there may be expenses such as guarantees for the conservation of trees or for the execution of necessary infrastructures. If you need financing, it implies procedures and mortgage expenses. It must also be considered that unforeseen events may arise during the construction, so it is advisable to add an amount of around 5 % of the PEM for this.

Budgeting to build a home? Are you interested in a piece of land, but need professional advice before buying? Our experts at UPPER BUREAU have extensive experience in construction projects and will guide and assist you. We conduct feasibility and financial viability studies, and help you set a maximum budget. As your Project Manager we will answer all the questions about your housing project, both in legal matters and in constructive matters.

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