Putting up a shelf is one thing, building a house is quite another, yet more and more of us are turning to the self-build option. As house prices have spiralled, they have outstripped building costs, making it cheaper for people to build their own property across most of the country.
Despite the increased responsibility and difficulty of taking on a building project personally, the revolution in do-it-yourself combined with the publicity given to television programmes promoting renovation and rebuilding, have increased the confidence of the amateur UK house builder. People are now more aware of what is possible and the type of companies that can help them through such a project as they hear through friends or the media what other people have achieved.
According to Stephen Page, senior mortgage adviser at intermediary Maypole House Mortgages, between 10% and 15% of the new houses built in the UK are now self-build. While this is on the up, Page acknowledges we are still some way behind mainland Europe and claims the figure in France is around 35% and the figure in Germany is over 50%.
Help is at hand
In the UK there are over 40 lenders offering self-build products, according to data provider Moneyfacts, although not all are actively marketed, and the volumes of business done vary significantly. Of these those such as Norwich & Peterborough Building Society, Ecological Building Society, Lambeth Building Society and Leeds & Holbeck Building Society have carved a niche for themselves in self-build, while others will really only do the odd case.
However, there are also specialist companies, such as Buildstore, which provide help on all aspects of the project from finding a plot of land to organising the funding and overseeing the building project itself. Buildstore also completes a yearly survey of the changes in the costs involved and the savings that can be made in various parts of the country by self-building. These figures provide a useful insight into some of the factors affecting the self-build market and how they have changed in the last couple of years.
To produce the figures, Buildstore takes the average price of a four bedroom detached property in a county and then compares it with the average cost of buying a plot of land and the average cost of building a four bedroom detached house. It also calculates the savings that can be made on value added tax (VAT) and then offers a comparison between buying and building.
Figures are compiled for the 76 counties across England, Scotland, Wales and Northern Ireland. In 2001, Buildstore found it was more expensive to build your own property in 12 counties, of which 10 were in England, one was in Wales and the other was in Northern Ireland. But by 2002 it was more expensive to build your own house in only seven counties, of which all were in England, and in 2003 Buildstore’s figures say it will now be more expensive to self-build in only three counties. Again all are in England.
The main driving force behind this cost trend has been the larger rise in house prices over that period compared to the fairly static cost of building materials and labour. In Sussex in 2001 for example, the average price of a four bedroom detached house was £269,807, the average plot of land cost £213,843, and building costs were £95,050. After VAT is deducted, Buildstore estimated it was almost £25,000 more expensive to build your own property. However, in 2002, the average price of a four bedroom detached property had risen to £328,500. And, although the cost of a land plot had also risen to £233,934, the cost of building had remained the same at £95,050. After VAT deductions, it was £13,672 less expensive for an individual to build their own property.
This pattern has continued in the figures Buildstore has for 2003 and while property and land has continued to rise steeply, building costs have only crept up to £97,426, making it an estimated £21,040 cheaper to self-build in Sussex for a four bedroom detached house.
Stable building costs have clearly been a factor in the growth of self-building, although those in the south east must be aware that costs there, like much else, tend to be higher than the rest of England. However, competition over available plots of land can make it expensive to self-build. Indeed the comparatively greater rise in the price of a plot of land in Hampshire (£200,286 in 2001 to £235,941 on 2003) compared to the price of a house (£290,725 in 2001 to £316,900 in 2003), has meant it has gone from being £9,544 cheaper to self-build in 2001 to £1,957 more expensive in 2003.
There are clearly many different permutations of the costs involved, and individual requirements and circumstances will change the underlying averages. Although price is a highly motivating factor for those looking to self-build, it is not the only one.
Alison Rolls, spokeswoman for Norwich & Peterborough, explains: ‘Increasingly people have an idea of what they want their house to be like, and so self-build is a way of getting what you want. It can also ensure you get the things you need such as an office if you work from home, or accommodation for an elderly relative in the form of a studio flat.’
As self-build becomes more mainstream, and people realise it is a feasible option, the idea of being able to build a house to personal specifications is also very attractive. While some do it just for the challenge and the satisfaction of living in a house they have built themselves.
The basic factors of house hunting apply, and self-builders still have to wade through the maze of location, cost and availability. However with self-build, there are also the considerations of planning permission to be made and it is imperative to know what will be allowed by the local council in terms of building before a plot of land is purchased. Without planning permission to build, the land will have little value and be of little use to the prospective builder. This will all have to be done and plans drawn up before a mortgage can be arranged with a lender.
The key to a successful self-build operation is planning, and being able to include as much as possible in the plans and costings before going to a lender. Obviously there will be things that come up during the project that are unforeseen, or choices and plans that are altered as things develop. Although most people’s plans will be finalised before they start, few can resist the option of spending a couple of extra thousand pounds en route to add a flexibility to the design that will allow them to add the extra room in the roof, for example, at a later date. For this reason somewhere between 10% and 15% should be added onto the final total asked of the lender to take account of these extra costs, according to John Hay, director of marketing and product development at Buildstore.
He says the amount that can be saved on VAT should also be carefully considered. Self-builders can make only one application for a VAT refund for material and labour and then only after a completion certificate has been issued. The claim has to be made within a certain amount of time and therefore it is an idea to hold off so that extra costs at the end of the project such as garden landscaping can be included as part of the total project.
Intermediaries should also be quick to point out to prospective self-builders the Stamp Duty costs that will be saved. For self-build, Stamp Duty is only payable on the cost of the plot of land and not on the valuation of the completed property. As such tens of thousands of pounds can be saved in many cases.
Page believes interest in self-build has doubled in the last two or three years, and agrees with Rolls that many people do it to get the house they have always wanted, or to ensure the exact features they require are in place. However, he also says many close to the building trade themselves simply realise it is much better value.
Although for brokers the total mortgage required for self-build may not be as large as it would be for buying an existing property, Page says this is not a major consideration, and it is more important that a total service can be supplied for clients’ needs.
Expansion in the self-build market has come through the small number of players that have made it a core concern for their business, and as its popularity increases it seems likely more lenders will increase their offerings.
It is unlikely self-build will become as significant in the UK as it has on the continent in the near future, but it is likely to continue its growth as people see the potential for saving and building to their own specifications. The mainstay of self-build projects looks set remain in rural areas where people can build their ideal home, or renovate an old rural building to move into when they retire. Competition for redeveloping city centre property is also fierce making it difficult for the private investor.
One thing is certain, people are certainly no longer afraid of doing it themselves.
It is now cheaper to self-build than to build in 73 out of 76 counties in the UK.
Borrowers should plan to add 10%’15% onto the final cost to cover unforeseen eventualities.
Stamp Duty is only charged on the land, which can lead to considerable cost savings in many areas.