Is There a Cost Premium for Passivhaus? What You Need to Know
May 2021
This article was originally published in 2021 and last updated in February 2026 to reflect current Passivhaus projects, costs, and industry data.
Cost is one of the most common and understandable questions homeowners ask when considering Passivhaus. While outdated articles often suggest large premiums, current Victorian projects show a far more nuanced reality – with some homes achieving modest premiums, cost neutrality, or even savings when performance is considered early in the design process.
If you’re considering a project and would like to speak with a Passivhaus architect in Melbourne, you can learn more about our approach here.
This guide explains typical Passivhaus costs in Melbourne and Victoria, including premiums, potential savings, retrofit considerations, and the key factors that influence overall project budgets.
What is the typical Passivhaus premium in Melbourne?
In Melbourne and regional Victoria, the cost premium for Passivhaus varies significantly depending on project type, form factor, glazing ratios, builder experience, and site constraints.
- Some projects see a modest premium when performance is integrated early.
- Some higher-budget homes may approach cost neutrality under specific conditions.
- Tight-budget projects or complex retrofits are more likely to experience a premium.
- Every project must be assessed on a case-by-case basis.
Is there a premium to go Passivhaus?
People are often drawn to the idea of Passivhaus because of the comfort, energy efficiency, and long-term performance it offers. However, many become understandably anxious when they encounter outdated or misinformed articles that suggest Passivhaus inevitably comes with a significant cost premium.
In practice, the reality is far more nuanced.
We are currently working on a project that is targeting Passivhaus certification, where the client asked a very direct and reasonable question: what is the cost premium to take this project to Passivhaus? In consultation with the builder, we estimated that the additional cost to achieve Passivhaus was approximately 2.5 per cent of the Cost of Works.
It is important to note that, in this case, the existing portion of the house was not being upgraded to the Passivhaus standard, which slightly complicates the comparison. Even so, this example illustrates that the premium can be relatively modest when Passivhaus principles are integrated thoughtfully and early in the design process.
This aligns with our broader experience: Passivhaus is not inherently expensive, but it is sensitive to budget, scale, and design approach.
This is particularly relevant when working with heritage buildings, where performance upgrades must be carefully balanced with existing fabric, approvals, and planning controls.
International and Australian Context
International data suggests that Passivhaus premiums in established European markets typically range between 3–8%, with some projects achieving lower outcomes as supply chains matured.
Australia remains an emerging market. Local cost outcomes vary significantly depending on climate, builder experience, and project complexity. While examples of cost-neutral outcomes exist, they are not universal and should not be assumed.
Our Fitzroy retrofit project targeting Passivhaus Classic certification, which started with a Master Plan.
Melbourne & Victoria Passivhaus Cost Premium
In Melbourne and across Victoria, where the weather is cooler than Sydney, there is typically a premium to take a project to Passivhaus. However, with smart design this premium may be modest, and in certain project types may reduce or be offset by design efficiencies.
Victoria Cost Savings
There are examples of two Victorian homes that were fully designed, documented, and costed by a builder, then it was decided to take them to the Passivhaus standard. The build cost resulted in a 7% and 15% saving without any visible changes to the overall design. This was due to numerous factors.
It should be noted that both were large homes: one measuring approximately 240 m² and the other 360 m². Each is larger than the average Australian home, which is typically around 230-240 m². Whilst the square meter rates were higher than your standard project home build. Thus, a smaller home with a lower budget would not necessarily achieve similar saving. You can read more about these two projects here.
Low Budgets
Square metre rates are highly sensitive to site, complexity, finish level, and market conditions, and should only be considered indicative.
If you are starting with a tight budget, there is likely to be a premium associated with achieving Passivhaus certification. In Victoria, the entry level for a very basic, customised Passivhaus home was generally considered to start at approximately $2,500 per square metre (2020 rates). By way of comparison, a modest Passivhaus granny flat delivered at the time sat at approximately $2,550 per square metre, excluding site-specific costs (2020 rates).
On a like-for-like basis, the 2026 equivalent of these figures would now typically sit in the order of $3,600–$3,900 per square metre, depending on scope, site conditions and prevailing market factors.
By contrast, we currently have a Passivhaus new-build project under construction, with cost planning indicating construction costs in the order of $6,000 per square metre (2025 rates), excluding the garage. While the home has a good form factor, it is smaller than the average Australian dwelling and is being delivered on a sloping site, both of which influence the square-metre rate when comparing costs on a like-for-like basis.
General Rules for Building in Victoria
If you are building a Passivhaus in Victoria here are some key rules:
- For entry-level budgets the premium will be higher.
- For higher budget projects the premium may be lower, or in some cases offset.
- Cooler regions may require higher insulation and glazing specification.
- Higher altitude sites can increase cost.
Cost Premium & Smart Design
In some Australian projects, reported premiums have been low where performance was integrated early and design efficiency was prioritised. However, outcomes vary widely depending on site, scale, and complexity, as numerous factors influence overall build costs. This can range from the design, site conditions, construction type, materials, amount of glazing, solar gain, site access, market conditions, etc.
Smart Design & Cost Reduction Strategies
With smart design the premium to build Passivhaus can be minimised or be cost neutral. In some cases there can be an overall cost saving (as illustrated above), with some examples including:
- A site with good northern orientation and minimal overshadowing from neighbouring buildings or vegetation.
- A favourable ‘Form factor’, which you can learn more about here.
- Minimisation of thermal mass (concrete, which is typically more expensive and is not required in a Passivhaus, unlike a passive solar design).
- Carefully managing glazing ratios and window specification to balance daylight, solar gain, cost, and performance.
- Analysing the brief to reduce the overall building area, for example replacing walk-in-robes with a robe, having a study nook as opposed to a study, having a second living area double up as a guest room with either a fold-out bed or murphy bed.
This is why early planning — often beginning with a Master Plan or Feasibility Study — is critical in aligning performance targets, budget, and scope before detailed design begins.
Other Factors Affecting Costs
As with any build the following factors can affect the build costs, which also need consideration:
- Site location
- Site access
- Soil classification
- Slope of land and terrain
- Demolition
- Parking
- Project’s size
- Construction type
- Selection of materials and finishes
- Market conditions
- Bushfire Attack Level (BAL), if applicable
- Septic system, if required
Passivhaus Software & Cost Savings
The Passive House Planning Package (PHPP) is a detailed performance modelling tool. It is proven to be accurate in practice. Whilst the Nationwide House Energy Rating Scheme (NatHERS) has performance gap between what is designed and what is built.
One benefit of PHPP is that you can save money by avoiding the over- specification of building components due to the build outcome being accurate. For example, the sizing of a split system air conditioner, if required, is based on accurate calculations as opposed to being over specified.
Life Cycle Costs
When building a Passivhaus, whole-of-life costs should also be considered, with studies illustrating a lower whole-life cost than a traditional new build. This is due to heating and cooling bills typically being reduced by 90%, and with higher build quality resulting in lower maintenance. Some lenders now recognise energy-efficient homes within green loan frameworks, although terms and eligibility vary.
Retrofit and Passivhaus Premium
The premium for a Passivhaus EnerPHit retrofit depends on the existing construction method, and how easy it is to bring the project up to this Passivhaus standard. This needs to be worked out on a case-by-case basis.
Managing Costs
When considering a Passivhaus new build, alteration, addition, or a EnerPhit retrofit it is important that you understand the overall project costs, including the costs of the works, along with other associated costs including the architect/designer and specialist consultants’ fees, along with other associated costs (landscaping, loose furniture, bank fees, relocation costs, etc.).
It is also critical that your budget is adequate for your brief, and if necessary, adjust your budget or your brief, or both. As the design develops it is important that you obtain a budget estimate, and this is updated as the design and documentation develops.
Conclusion
As with all projects, it is important to understand the likely costs before proceeding with the project’s design and documentation stage. This is even more critical for Passivhaus or EnerPHit projects in Melbourne, whether the outcome will involve a premium, be cost-neutral, or deliver savings.
We love talking about Passivhaus. If you’re considering building a Passivhaus home or undertaking a deep energy EnerPHit retrofit, start a conversation with us.