Will I Save Money By Building a Smaller House?
Summary
- Smaller homes don’t always cost less overall
- Cost per square metre is often higher on smaller builds
- Fixed costs (kitchens, bathrooms, services) stay similar regardless of size
- A slightly larger home can offer better long-term value and resale appeal
- Building smaller can make sense when designed efficiently and if you are working with a small area.
Building a smaller home is often seen as the simplest way to reduce costs. While this can be true in some cases, it’s not always as straightforward as it seems.
The relationship between size and cost depends on a range of factors, including design, layout, and long-term goals. Understanding how these elements work together can help you make a more informed decision before committing to a build.
Below, we break down what to consider when deciding whether building smaller will actually save you money.
1. Why Smaller Doesn’t Always Mean Cheaper
At first glance, a smaller home should cost less to build, but some of the most expensive parts of a home don’t reduce significantly with size.
These include:
- Kitchens and bathrooms
- Plumbing and electrical systems
- Design, consent, and compliance costs
Whether your home is 100sqm or 160sqm, many of these core elements remain similar in cost. As a result, the overall savings from reducing size aren’t always as significant as expected.
2. How Cost Per Square Metre Works
Cost per square metre is often used as a guide when budgeting for a build, but it doesn’t always tell the full story. Smaller homes can sometimes have a higher cost per sqm because:
- Fixed costs are spread over less floor area
- Compact designs may still require multiple wet areas (kitchen, bathrooms)
- Efficient use of space often requires careful design and detailing
In contrast, slightly larger homes can distribute these costs more evenly, which can improve overall value.
3. The Impact on Long-Term Value
Beyond the initial build cost, it’s important to consider how your home will perform over time. In many cases:
- Homes with additional bedrooms or flexible spaces have broader buyer appeal
- Larger homes can offer better resale potential
- Future lifestyle needs (family, working from home) are easier to accommodate
For example, a 3-bedroom, 2-bathroom home will typically appeal to a wider range of buyers than a 2-bedroom, 1-bathroom home. While including an additional bedroom or bathroom may increase the upfront build cost slightly, it can significantly improve the overall value and market appeal of the home, meaning building smaller doesn’t always deliver the same long-term value. Afterall building a home should be an investment, not an expense.
For more on costs, read our latest blog: How Much Does it Really Cost to Build a Home in NZ?
4. When Building Smaller Does Make Sense
There are still many situations where building smaller is the right decision. This can include:
Building on a smaller or more constrained site
Prioritising a low-maintenance lifestyle
It’s only catering for 1 or 2 people with the intention to keep long-term
Designing a simple, efficient layout with fewer wet areasWhen planned well, a smaller home can be highly functional, and well suited to your needs.
5. Finding the Right Balance
Rather than focusing purely on size, it’s often more helpful to think about how your space is used. A well-designed home, regardless of size can:
- Maximise functionality
- Improve day-to-day living
- Deliver better overall value
The goal isn’t necessarily to build bigger or smaller, but to build smarter based on your budget, site, and long-term plans.
Final Thoughts: Cost vs Value
Building smaller can reduce costs, but it doesn’t always guarantee better value.
Understanding how size, design, and long-term considerations interact allows you to make a more informed decision from the outset. In some cases, a slightly larger home may offer a better balance between upfront cost and future return, while in others, a well-designed smaller home may be the right fit.
If you’re planning a build and want clarity around what size home makes the most sense for your budget and goals, the team at Villaworx Construction can help guide you through your options.