Cheap land, cheap labour and accessible funding make this the best time in years to build your own home from scratch
As years go, 2009 is not proving to be a great one for the housing market. Prices have plunged precipitously, repossessions are on the rise and mortgage deals are thin on the ground. Hunkering down and trying to weather the storm seems to be the safest course. Surely, then, to get out the bricks and mortar – or, more likely these days, wood – and start building your own home would be the height of folly?
Apparently not. While the credit crunch may have most of us tightening our belts, now could be one of the best times in years to build your own home. Intrigued? Read on.
Land
Traditionally, one of the biggest hurdles faced by self-builders has been finding land. At the moment, however, an increasing amount of it is becoming available because developers are not competing for plots as they were during the boom years, and a few are even selling off parts of their land banks, some of it already with planning permission.
PlotSearch, a database that enables self-builders to look for suitable land, says that the number of plots on its books rose by 20% during the course of last year – at the latest count, it had 7,628 of them across the country advertised for sale. They are also getting cheaper. “Land prices are down by 50%, whereas house prices are down by 15%-20%, so you’ve already seen a significant differential,” says Liam Bailey, head of residential research at Knight Frank estate agency.
David Snell, the author of Building Your Own Home (Ebury £25), who has completed 11 projects and now advises other self-builders, says there are some terrific bargains: “I helped some people buy a plot in Cornwall for £125,000. It was originally on for £160,000.” Can’t get your hands on an empty site? You could always buy somewhere with an existing building and replace it – which should make it easier to obtain planning permission for your dream home. That is exactly what Richard Morrice did when he bought a plot at auction last February in Shoreham-by-Sea, West Sussex. The land had a 1920s chalet-style bungalow on it, but Morrice, an architect, knew he would be able to build two homes on the site, so he set about demolishing the old property and building the new ones. He split the cost of the site with a friend who will live in the other house when it is finished, hopefully next month.
“It has worked pretty well,” says Morrice, 43, who spent about £160,000 on his share and expects the build cost for the new three-bedroom house for himself and his family to be about £200,000. “And when you self-build, you start with a blank sheet of paper and can put in what you want.”
Whatever you buy, make sure you consider planning permission. You can’t just build anywhere – and there are some sites for which you will never get consent. Buying land with permission in place is the easiest way, although the scheme approved may not be exactly what you want – andgetting it modified means spending time and money.
There are other methods: Craig Noel, head of town and country planning at Strutt & Parker estate agency, advises buying land under an option agreement or on a conditional contract.
“With an option agreement, you pay a premium to the owner for the right to put a planning application in,” he explains. “If it succeeds, you have an option to buy at open market value. If you don’t buy it, the landowner has the benefit of permission. If you do, you know you’re getting a piece of land you can build on.” A conditional contract is similar, but you are obliged to buy the land if planning consent is secured.
The premium paid is open to negotiation, and will be related both to the value of land and to the likelihood of permission being granted; whatever the figure chosen, it allows the self-builder to get some share of the “planning gain”: the uplift in the value of a site that results when you’re allowed to build on it.
Timing
While everyone else is bewailing the fact that they bought at the peak of the market, self-builders can probably look forward to a profit at the end of their labours. Why? “Building your own house, generally speaking, is a two-year cycle,” says Tim Doherty, managing director of the National Self Build and Renovation Centre, in Swindon.
Doherty says it takes about six months to find and buy a plot, another six months to finalise the design of the building, then 9-10 months for the build itself. In other words, start the process now and your house should be finished by the end of 2010 or beginning of 2011 – by which time the housing market is expected to be recovering.
Finance
Obtaining a regular mortgage these days is not easy, but lenders are still keen to finance self-builders – offering as much as 95% of the land and build cost.
Why the difference? Self-building on average increases equity by 25%-35%, so, in effect, you’ll end up with a 60% mortgage once you’ve finished. The money is usually released in instalments, with interest payable on each part only as it is drawn down – again lowering the risk. Typically, you might use 30%-50% of the money to buy the land and the rest to fund the build, usually in five stages.
“Lenders like that because there’s a big cushion for a drop in values,” says John Hay, head of financial services, marketing and product development at the self-build experts BuildStore. “You’re much less likely to be in a negative-equity situation in a couple of years than if you buy an ordinary house.” Self-builders pay stamp duty on the land value only, rather than the completed house, and can reclaim Vat on building materials (£10,000-£15,000 on a typical project) – so the numbers begin to add up.
Make sure you budget carefully: although build costs vary considerably from project to project (and depend on how much work, if any, you do yourself), you should allow £90-£110 per square foot, which doesn’t include fixtures and fittings.
Labour
Despairing of finding a builder? The recession should make it easier. About 70,000 building workers were laid off last year – and though many of the eastern Europeans who flocked here in recent years have gone home, the odds are now more in your favour. “In the current economic climate, it is easier to get somebody, although good builders may still be booked up,” says Julian Weightman, a member of the Federation of Master Builders, who estimates that he has worked on at least 50 self-build projects.
Many builders are reducing prices, too. “Most of the companies have down-graded their costs by at least 25%,” says David Snell – he cites one quote he was given, originally for £165,000, that he was able to knock down to £125,000.
Don’t get too carried away by price reductions, however. “Get a builder who can cover all the right trades or has access to the right people,” Weightman says. “It is important to see examples of their previous work, and membership of trade organisations is essential – it provides people with clear credentials.”
Practical issues aside, building your own home means you end up with exactly what you want, from the size of the rooms to the finish. “It’s so much more pleasing to choose your own layout – you can live the way you want to without inheriting other people’s style choices,” says Kerry Skinner, 43, who has built a house on a plot of former agricultural land near Wincanton, Somerset.
It was a complicated process, not least persuading the farmer who owned the land to sell it subject to planning permission. Six years after finding the plot, Skinner had completed both the house, which has enormous open-plan rooms, and a studio from which to run her interiors business.
Now she and her husband, Stephen Deverell, 51, plan to create a building connecting the two and convert two more sheds into workshops. “It’s fantastic to self-build, because it gives you such flexibility,” Skinner says – and, of course, you can incorporate green features such as ground-source heat pumps, efficient insulation and rain-water harvesting. Her children, Jessie, 7, and Gaia, 3, and her stepsons, Josh, 13, and Sam, 12, love the space, which is big enough to include a pool and treehouse. “I would definitely do it again,” she says. Now could be the time to follow her example.
The National Homebuilding and Renovating Show is at the NEC, Birmingham, from Thursday to Sunday; tickets £10, or £14 on the door; homebuildingshow.co.uk