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How To Figure The Cost Of Construction When Building Overseas

Lief Simon by Lief Simon
May 16, 2014
in Real Estate
0
Construction and building overseas come most of the time much cheaper than inland.
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How Much To Build Your Dream Home Overseas?

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$45 to US$50 per square foot, including the cost of the enclosed space and the covered exterior space.

That’s an appealing number; US$45 per 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$45 per 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.

Local housing

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.

Middle-class local housing

Jump up to the next price level—to say US$75 to US$80 per 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.

High-quality housing

Go up to US$100 per 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$100-per-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$45 per square foot to US$100 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

Continue reading: Cost Of Living In Costa Rica Versus Cost Of Living In Nicaragua

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Lief Simon

Lief Simon

Lief Simon has lived and worked on five continents and traveled to more than 60 countries. In his long career as a global property investor, Lief has also managed multimillion-dollar portfolios of rental properties, for others and for himself. He offers advice on international diversification in his twice-weekly Offshore Living Letter and monthly Simon Letter dispatches.

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