MAB’s market analysis revealed that custom build houses are on average 15% cheaper to construct because builders’ overheads are greatly reduced and the additional marketing costs, used by speculative builders to shift stock, are not required.
Working capital pressures are lower because builders specialising in custom build do not hold land banks and receive staged payments from their customers as the build progresses.
Reducing builders’ costs and margins provides equity to the homeowner which in turn reduces risks for lenders.
But the research showed that the current planning system is geared towards speculative new builds. Larger builders have the resources to spend heavily on land and battle the planning system to secure planning permissions.
MAB argued that the custom build market could be better supported by local authorities who could use section 106 planning agreements to make land with planning permission for custom build more readily available.
A section 106 planning agreement is typically used to place a requirement on a large developer, granted planning for a private housing project, to build an agreed amount of affordable housing on the plot.
Andy Frankish (pictured), new homes director at Mortgage Advice Bureau, said this clause could be used to require developers to put aside a number of plots for custom build homes.
The developer could then either team up with homeowners to build the bespoke houses or sell the plots to SME builders who could work closely with individuals to design their own homes.
“The resources and time needed to successfully gain planning permission all but bars many smaller builders from the process, and perpetuates the speculative model of house building,” said Frankish. “The section 106 agreement must be put to better use in a more concerted effort to improve access to custom build land if the new build sector is to have any hope of meeting demand.”
