Building a home in a city with a high cost of living is not always an option.
But that’s what many people are doing now, and they’re doing it for more than a decade.
And they’re not alone.
In fact, as construction costs rise, so too do the costs of getting a home built.
As the U.S. Department of Housing and Urban Development (HUD) recently put it, the cost of constructing a home has gone up more than 10% a year since 2005.
The median price of a single-family home has risen by more than $5,000 in just five years, and it has nearly tripled since 2000, when it was $2,000.
In other words, a single home built in the last five years costs about $1.3 million more to build than a similar house built in 2000, according to the National Association of Home Builders.
In many cases, these cost increases are related to a surge in the number of homes being built in cities with high property taxes.
For example, as the number and cost of new construction have risen, the number for single-families and condos has dropped, and both have dropped below 50% of all new construction.
“If we’re talking about the homebuilder who is going to have a new home built, and if they’re looking at a project that has a price tag of $50,000, $60,000 or $70,000 and that’s the cost per square foot, that’s really where the risk of building a home becomes a big concern,” says Richard Hays, a senior economist at Zillow, which tracks real estate.
Hays and his colleagues at Zellers and real estate firm RRE Group surveyed more than 100 homebuilders across the country to find out how much they spend on home construction costs, and what the average cost is for a home on average across the U, Canada, Mexico, Spain and Greece.
Hues’ study found that most builders in the U., Canada and Mexico are spending $1,800 per square feet, or roughly $40 per square meter, on building a new one.
The most expensive homes are built in countries like Italy, Spain, Greece, the Netherlands and Australia.
“These countries, they’re a very expensive place to build,” Hays says.
In some countries, the average price for a single family home is between $60 and $80,000 per square yard.
For condos, the median price is $1 million to $1 billion per square-foot.
That’s more than three times the cost in the United States, which Hays attributes to higher taxes and regulation, higher real estate taxes and a shortage of housing.
“When you look at all of these factors that contribute to these kinds of costs, they are very high,” Hues says.
Some of these countries have also seen a rise in the cost for home loans.
In Spain, where home prices have risen by nearly 60% since 2007, there are more than 3,000 new home loans outstanding in the country each year, up from about 300 in 2011.
“Spain is seeing a huge amount of construction activity, particularly in the area of new housing, so there are a lot of mortgages available to the average person,” Hynes says.
Home buyers in the region are also getting more expensive for the same homes.
In the Netherlands, where the median home price is about $200,000 to $250,000 each, the housing market is seeing more activity.
In 2014, the country’s largest housebuilder, Hynes Associates, issued a warning to its buyers, warning that the “trend is accelerating,” which could mean the market is over-priced, and he says the demand for condos and houses has already reached a point where the supply of them is limited.
“People are looking at new construction projects at a much higher price than they have been in the past,” Himes says.
Hynes attributes this to the fact that many of these buyers are not necessarily from Europe or the U; they’re coming from the U.-Middle East.
And it’s a place where home building is a relatively low-risk activity.
The cost of building homes in the Middle East is much higher than it is in the West, and home prices in that region are relatively stable.
“There is a lot more interest in this area, particularly among young people,” Hyses says.
While there’s some evidence that people in the Arab world are willing to pay higher prices for housing in the Netherlands than in the rest of Europe, Hays warns that this could change if prices start to increase in the future.
“The only time it will get really expensive is when the price starts to go up in the developed world,” Hries says.
So what can people do if they want to build their dream home for less?
Some are taking steps to get started on their journey.