Building your own home

Updated 03 December 2020

5min read

Nick Green

Financial Journalist

Updated 03 December 2020

5min read

Buying a plot of land and building your own home may cost much less than buying an existing property. It can be a way to acquire your dream home at an affordable cost, or alternatively a way to profit from the housing market.

Building a whole house from scratch is a huge undertaking, but if you are an experienced property developer the rewards can be equally big. Here are some pointers if you’re tempted to try a self-build project.

What kind of self-build should I do?

There are quite a few different ways in which you can build your own home.

1. DIY or semi-DIY

If you have a lot of construction experience (e.g. you are professional builder), you can physically design and build the whole house yourself. Even then, you’ll need plenty of sub-contractors to sort out specialist areas such as plumbing and electrics, not to mention extra manpower for all the labour involved.

A more realistic option for non-expert builders is to sort out the design yourself (with the help of an architect) and enlist a contractor to manage the actual building project.

2. Kit homes

For an easier option, you can choose a kit home. You select a design (usually engineered off-site) and the company will assemble it for you on your plot of land.

3. Community collaboration  

A community collaboration can be one of the lowest-cost options. You work together with a group of people to acquire a plot where several homes are built, along with appropriate facilities (e.g. play areas for children, communal gardens, allotments, parking). When it works, this kind of collaboration can be wonderful – you have a ready-made community in a neighbourhood you build yourself. However, it can be a logistical challenge and people can let you down.

If affordability is a real issue, you can try and obtain the help of a social landlord or Community Self Build Agency to help organise the construction work for you.

4. Custom built homes

If an actual self-build is beyond you, you could try custom-build instead. This gives you flexibility over the design without having to get too involved with the construction. A developer will take care of the site, design and construction, and you can have input over a number of elements. Sometimes the developer will build the basic structure of the house (the trickiest part) and you will finish it off as a self-build.

Is it cheaper to build a house?

The big advantage of self-build is that this option can be much cheaper. For example, in 2018 the average cost of a plot in the UK was £190,000 while the average cost of construction was £270,000 - totalling £460,000 for a home with a market value of £500,000. Most properties on the open market will cost you far more than a house built from scratch. When you buy a ready-made home, you’re paying not just for the land, materials and labour, but also for the convenience. So if you’re prepared to take the trouble, building a home yourself can be a huge money saver.

There can also be significant tax savings. You won’t usually have to pay as much stamp duty, since you’ll only be paying it on the plot itself. You can also often claim 20 per cent VAT back on materials.

Do I need a special self-build mortgage?

Building a home yourself requires a special kind of mortgage. This can be the trickiest financial stumbling block, since your property may be difficult to value until after it’s built. Most self-build mortgages are paid in instalments, with lenders releasing money only when certain construction milestones are reached. Seeking up-front advice from a mortgage broker is therefore essential when you draw up your budget, so you know how much money you’ll have available at each stage of development. You don’t want your project to grind to a halt because of a cash flow problem.

How do I find a plot of land?

Do your research, and keep your ear to the ground! Estate agents can sell plots of land on behalf of landlords, and you can also register with a local authority’s Right to Build scheme, which can link you up to plots of land in the area. If you’re flexible on location, register with several local authorities as competition for plots can be fierce.

Before you buy a plot, do look into how easy it is to connect utilities such as water, gas, electricity, phone lines and sewer systems. The local service providers should be able to provide this information. Only proceed if they can tell you explicitly that it can be done, and is affordable for you – this is not something to find out at the last minute.

How can I get planning permission for a self-build home?

Some land purchases come with planning permission for a certain type of property already granted. Even if this is the case, be sure to check with your solicitor that these plans are confirmed and legal. IF the land you’ve bought doesn’t yet have planning permission, you can apply for permission through the Planning Portal website. Getting advice here is crucial because there will be limitations as to what you can do.

If possible, apply for planning permission before you buy the land, to ensure that your plans will be viable. A good tip is to speak to neighbours first to get them on your side – introduce yourself, talk about your plans and get their feedback first, and they’re much less likely to object.

How do I project-manage a self-build?

Whether you’re the master builder or just hiring a contractor, you will still be the project manager to some extent. As such, your task is to make sure everything comes together on time and on budget. Here are some of the main jobs you may need to oversee:

• Sticking to the budget – including the costs of materials, labour, VAT and unexpected work.
• Managing timeframes – keeping the project on schedule as much as possible, and organising what’s happening and when.
• Ordering materials – deciding what these will be and making sure they’re on site on time. That includes getting the utilities connected to the site.
• Checking legalities – making sure the permitted plans and Building Regulations are followed. Your solicitor can help you here.
• General site upkeep – ensuring it is safe, tidy and secure. Remember, you could be responsible for the safety of your contractors.
• Organising contractors – managing the timetables of different contractors can be tricky. For example, if a roof-tiler is booked in but work on the roof beams is overrunning, you’ll need to reschedule in good time (rather than cancel at the last minute and upset the tiler).

Due to soaring house prices and the wider availability of information online, self-build projects are becoming more popular. That doesn’t necessarily mean they’re getting any easier – but at least you can get a clearer idea of whether such a challenge is for you.

As a first step, talk to a mortgage broker about self-build mortgages. They may be able to offer you other tips too.