Buying VS Building

Let’s face it. Building your own home is expensive. Buying a home is also expensive. Which is better, from a financial point of view? Can building a home be cheaper than buying?

Unfortunately for anyone wanting a nice, simple answer, this is a how-long-is-a-piece-of-string question, because the cost of both depends on so many factors – including the type and size of home you want and where you want to live. Not only the region you’re in, but the location you choose within that region can have a big effect on both land and property prices.

The costs: building a house versus buying a house

The typical cost of building your own house is generally estimated at roughly £1,500 to £2,000 per square metre. For a three-bedroom home, the Royal Institute of British Architects’ minimum recommended size is 93 square metres, so that would work out at £186,000 – but you may want more space. Then you need to add the cost of a plot of land, which can be the same again.

In contrast, in August 2019, the average house price in the UK was £234,853, according to the Land Registry. This varies widely across the country: in Surrey it was £442,782, in Northumberland £159,424. Of course there will be extra expenses on top of this – Zoopla reported that the average homebuyer spends more than £12,000 on taxes, surveyors’ and estate agents’ fees and other moving costs – plus you may have to spend money on repairs, remodelling, decorating and landscaping.

Just as there are a huge variety of homes for sale, there are different ways to build your own home, ranging from custom-build homes, where you essentially modify a developer’s basic template, to designing and building your own house from scratch. Custom-build estate agency Custom Build Homes says the former option can actually work out up to 15 per cent cheaper than a like-for-like traditional home purchase.

Where you really do score when you build your own home is in value for money. Back in 2013, https://www.thisismoney.co.uk/money/index.html quoted Stephen Wilmot, from the magazine Investors Chronicle, as saying: “Self-builders can, it seems, make 20 to 30 per cent profit above what they spend on land and building costs on a pretty consistent basis, even accounting for house price inflation. Even projects that have had problems can manage to sell at a decent profit.” But in our experience, the value of building your own home goes far beyond the monetary. You’re creating a home that’s personal to you, exactly as you want it, and which you hopefully won’t have to move from for a very long time.

What about mortgages?

Mortgages for self-build homes are riskier for lenders than mortgages on houses that already exist, as there’s no home against which to secure the loan. For this reason they tend to have higher interest rates than standard mortgages while construction is in progress – usually between 4 per cent and 6.5 per cent. But you can usually move to a standard mortgage once the house is complete.

What about stamp duty?

There’s no stamp duty on self-build homes, but you pay stamp duty on the land if it costs more than £125,000 – unless this is your first home, in which case the threshold is £300,000.

Energy efficiency

A major benefit of a new home is that you can build to the latest efficiency standards, opting for ecofriendly energy sources, plumbing, electrics and appliances, and consequently saving on your bills throughout your time living there. You can fit things like underfloor heating, or heat recovery and ventilation systems, more easily and cheaply in a new build than in an existing home.

Can I save money by doing the work myself?

You may choose to use an architect to help you design your home, and you may also choose to hire a contractor to oversee the building work. Your architect should be able to do both if you want them to. A typical architect’s fee would be between five and ten per cent of the build cost, or up to 15 per cent if they’re overseeing the building process too.

Alternatively, you may wish to project-manage the construction work yourself – this requires time, patience, effort and knowledge (which you can acquire), but you can probably save 10 to 15 per cent of the total cost by doing so. It isn’t simply a choice between taking the whole thing on yourself or handing it all over to the professionals, either – any work you do yourself will save you money, as labour accounts for around a third of the cost of building a home. Things like electrics, plumbing and anything to do with gas appliances need to be left to those qualified to do them, but with those exceptions, www.homebuilding.co.uk says: “You can undertake almost every aspect of the building work if you have the time and skill to complete it competently. Trades more easily undertaken by the DIY self-builder include carpentry, fitting insulation, tiling, general labouring, decorating, floor laying and landscaping.”

You can also claim back the VAT you pay on many of the buildng materials you use.

You’re in control of the budget and the design, so can choose to some extent what you want to spend – and if you run a tight budget, do some of the work yourself and are modest in your tastes, there is scope to make a lot of small savings across the whole project which can add up to thousands of pounds. The fabric of the building is the thing that’s worth really investing in; when it comes to things like fittings, kitchens, bathrooms and flooring, you can save a lot by opting for ordinary rather than high-end products. Michael Holmes, chairman of the National Custom and Self-Build Association, writing on https://www.homebuilding.co.uk/, said: “The cost of external facings, joinery, flooring, fittings – and renewables – can potentially double the cost of building the same house compared to a standard specification.”

The bigger the house, the more it will cost to build, but this isn’t proportionate – some costs don’t increase, or don’t increase much, with the size of the house. This means larger houses are better value to build, and houses with several storeys are better value than large bungalows.

South east London architects Bluelime Home Design has been designing new homes, extensions and renovations across Kent and London for 13 years. We now have offices in Dartford, Bromley, Bexley, Erith and Croydon –Get in contact to arrange a free architect consultation.

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