Building A House Overseas

How Much To Build Your Dream House Overseas?

May 28, 2010, Panama City, Panama: How can you determine how much it will cost you to build a house in another country?

Dear Live and Invest Overseas Reader,

How much does it cost to build a house overseas?

As my wife, Kathleen Peddicord, likes to say when people ask her how much it costs to live overseas, "I have no idea...and neither does anyone else."

It depends where and what you're building. Not only in what country but where in that country. And not only whether you're building big or small but also how you're finishing, fitting out, etc.

A friend is building a small house in the interior of Panama. He is acting as the general contractor and hiring local laborers. He can do this because he has years of experience building in this part of this country.

It's a small house, so he's buying materials retail. And it's basic. Nothing fancy.

His cost for this small guesthouse, once it's completed, will be US$30 to US$35 per square foot, including the cost of the enclosed space and the covered exterior space.

That's an appealing number; US$30 a square foot is absolutely (as opposed to relatively) cheap.

So, if someone were to ask me what it costs to build a house in Panama, I could reply, "About US$30 a square foot."

And I'd be telling the truth. I could provide the invoices to back it up (with my friend's help).

But I wouldn't be giving the full story.

At that price, you're building what I refer to as "local housing." A simple structure that serves the basic purposes. There's a basic bathroom, a basic kitchen, a small bedroom, maybe a small sitting area. No fancy fixtures, no high-end tiling (maybe no tiling at all), no closets, no laundry room, etc. This kind of "local house" can be comfortable and certainly livable, but it is not the quality of construction and finishes you would expect to find in a middle-class U.S. neighborhood, for example. And it probably doesn't meet the expectations of the typical retiree considering building a home in another country.

Jump up to the next price level--to say US$50 to US$60 a square foot--and you're building what I call middle-class local housing. This is probably closer to the kinds of structures you'd expect to find in a middle-class neighborhood in the States--except for the finishes. Still, these won't be what you're used to. Windows, faucets, door hardware, and lighting fixtures, for example, will be what you'd likely consider very low-end.

Go up to US$90 a square foot, and you're in the ballpark for high-quality construction and finishes. You can spend as much as you want when it comes to finishes, and this is where the cost of construction can really increase. In the US$90-a-square-foot range, you're buying very good quality stuff.

So, again, how much does it cost to build a house in Panama? As much as you want it to cost, within a very broad range (US$30 per square foot to US$90 per square foot or more), depending on the kind of house you want to build.

This is the case almost everywhere. In some countries, you can't build at the really super cheap end of the range, because of construction regulations. This is the case in much of Europe. Still, even in Europe, for example, you can spend as little or as much as you want on finishes.

I was reminded of all this by a reader who wrote yesterday to say that he believes he could build a house cheaper in the States than in either Costa Rica or Panama. I guess that could be true--some places in the States, for some kinds of construction--though, frankly, I find it hard to believe. Not when you compare apples to apples--comparable kinds of construction and comparable levels of finishing.

Lief Simon

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Kathleen Peddicord

Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 25 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring, and investing overseas in her free e-letter.

Her book, How To Retire Overseas—Everything You Need To Know To Live Well Abroad For Less, was recently released by Penguin Books.