New Tax Changes may Help a Self Build Boom.

by Mark Johnston

New Tax Changes may Help a Self Build Boom.

Just three years ago the idea of constructing your own home was poised to undergo nothing less than a “revolution”.

The then housing minister Grant Shapps pledged that the proportion of new homes being self-built would rise from 10 per cent to 25 per cent.

However, the latest market report from Homebuilding & Renovating magazine, which is  considered the sector’s most authoritative source of information, shows that in the year to September 2012 the number of self build homes completed across the UK was 11,870 representing only about 9 per cent of the total volume of new homes.

One of the reasons individual self-builders  Even if they succeed in finding a plot which is the right size, affordable and likely to get planning consent for a home, they may not be able to get a mortgage for the build.

The number of lenders in this market has shrunk since the credit crunch and those that remain have strict criteria but you can usually borrow up to 75 per cent of the land and 60 per cent of the build costs. Pay outs are in five or six stages and the lender may want to send round a valuer at each stage to assess how much the property is worth before releasing more funds.

“The self-build mortgage market has not recovered in the same way as the mainstream, it has actually got worse,” says Calum Kerr, a self-build specialist at mortgage broker SPF Private Clients.

Unsurprisingly, few first-time buyers are likely to be self-builders as the funding model still favours those who are already asset-rich through owning a home before.

Yet despite the dismal completion figures and the lack of finance, many experts believe that there is  genuine progress  being made to turn self build in to a large and more accessible housing option.

Recently the government has announced plans to make self builders exempt from a tax that used to apply to all buildings over a certain size.

Relief on the Community Infrastructure Levy (CIL) will be for homes built or commissioned by individuals planning to live in their home as owner-occupiers. The potential savings would be significant as the charge typically adds 10 to 15 per cent onto build costs.

With this particular barrier removed the gap between the number of self built new homes in the UK and the countries European counterparts is expected to close.

Current data shows that only 10 per cent of the UK’s new homes are self builds.

Building your own home is a brave move but these new steps may mean that it will slowly start to gaining popularity in the UK.

Self build can be surprisingly affordable. There is no value added tax (VAT) to be paid on new builds and the house is likely to be worth much more than it cost to build.

Household bills could also be cheaper too if the builder builds a more sustainable home with top notch insulation and energy efficient features such as heat pumps.

 



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