The plots thicken: DIY houses on rise as new buyers are priced out of the market

Melanie Bien sees how much it will cost to join the many people who are purchasing land and constructing their own homes
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The Independent Online

As property prices go through the roof, more and more first-time buyers struggling to get a foot on the housing ladder are taking the drastic action of building their own home.

As property prices go through the roof, more and more first-time buyers struggling to get a foot on the housing ladder are taking the drastic action of building their own home.

Despite the stress and sheer hard work involved in a self-build project, mortgage lenders report a surge in interest.

"We are seeing more first-time buyers opt for self-build," says Alison Rolls, a spokes-woman for Norwich & Peterborough building society. "They usually use a family connection, such as mum or dad, or nan and grandad, who might have some land they can let them build on. This obviously isn't available to other self-builders, so it gives people who find themselves in this position quite an advantage."

First-timers are often attracted to DIY homes because it can work out cheaper than buying a ready-made property. The average house constructed in this way costs £147,000, according to Self Build ABC, the self-build specialist, and by the time it is finished it should be worth, on average, 25 to 30 per cent more than it cost to build. The average ready-made detached house costs £248,000.

Ten per cent of all homes constructed in the UK each year are self-build, as owners also like the fact they can get exactly what they want (local planning regulations permitting) so won't have to spend a fortune renovating or redecorating.

Another advantage for first- time buyers trying to keep costs down is that they don't have to pay stamp duty on the property itself or on the building work.

Stamp duty is payable only on the plot of land, and then only if it costs more than £60,000. Given that, according to the Halifax, the average first-time buyer pays £1,000 in stamp duty, this could result in a considerable saving.

The growing popularity of self-build has also made financing your project easier than ever. In the past, constructing your own home meant having to live in a caravan on a muddy site, scrimping and saving to pay for each stage of the building work.

But all that has changed. Leeds & Holbeck building society, which, like N&P, reports a rise in mortgage applications from first-time self-builders, is typical of many lenders in that it allows them to choose from its entire range of home loans. This means you can benefit from the best fixed or discounted mortgage on offer from that lender - rather than settle for an uncompetitve standard variable rate, which would cost a lot more in the long run.

Self-build mortgages do differ in one respect: the way in which the money is released. With a standard loan, borrowers receive a lump sum up front to enable them to buy the property. But with self-build, the cash is released in several stages as various sections of the building work are completed.

For example, you get an initial loan to help buy the plot of land, then another sum once the foundations are finished, another once the roof is on, and so on. The lender will insist on an inspection at each stage to check the work is completed satisfactorily before it grants each tranche of cash. These inspections cost around £40.

Since the lender releases the money in stages, you will need some cash in reserve to get started and pay tradespeople up front. This could a problem for first-time buyers. You will also need a bigger deposit than on a standard mortgage. Most lenders require 10 or 15 per cent of the total value of the loan.

Before you start hunting for a suitable plot on which to build, check how much money you can borrow. An independent mortgage broker is a good place to start, as they have access to the best deals on the market. Alternatively, you could make a direct approach to lenders specialising in self-build.

Once you know how much cash you have to play with, you can search for a plot to build on. Opt for one with outline planning permission if you want to speed up the process.

If you have building skills and can do a lot of the work yourself, this will help, enabling you to cut costs. But it is not absolutely necessary. Employ the best tradespeople you can find, using personal recommendations where possible, and obtain at least three quotes for each job.

Contacts: www.selfbuildabc.co.uk and www.buildstore.co.uk

'All the hard work we put in has paid off'

Joanne Chapman, 27, and her partner Gary Robinson, 30, decided to build their own home in King's Lynn, Norfolk, three years ago instead of buying a ready-made one.

The first-time buyers used a self-build mortgage from Norwich & Peterborough to fund the purchase. They could have got a standard home loan but wouldn't have been able to afford a ready-built property of the same size and quality as the one they now have.

"We have a four-bed detached bungalow with double garage and are very happy with it," says Ms Chapman. "It would have been very difficult to borrow enough money to buy a property as good as this one, but all the hard work and effort we put in have paid off."

Ms Chapman, a secretary, and her partner, a builder, did most of the work themselves during their spare time: evenings, weekends and holidays.

"We initially wanted to buy a property we could renovate, but it turned out we could get a plot of land and build exactly what we wanted for the same money. We bought land with outline planning permission and drew up the plans ourselves. We also did most of the work apart from the Artex ceiling, saving money on labour costs and materials."

The project took over a year to complete. N&P released money as each stage was finished, and the couple didn't have to pay stamp duty because the land cost less than £60,000.

Ms Chapman says it is something they would do again, although she warns that someone without her partner's experience of the building trade might struggle.

"You don't have to be very knowledgeable, but it was a benefit that we knew where to go for materials and how much they would cost so we could budget fairly tightly. If we hadn't had that knowledge, we might have run into problems."

ADVICE FOR SELF-BUILDERS

* Are you cut out for self-build? Have you got enough knowledge to project manage the job yourself or will you need to hire someone to do this?

* Set your budget. Have a definitive sum in mind and add 10 per cent as a contingency.

* Find a plot. Sign up with a local estate agency or use a land-finding service such as www.plotfinder.net.

* Design. Find the right architect with relevant experience. Interview a few and look at examples of their work.

* Planning permission. Your design must fit into the landscape.

* Materials. You might be excited about choosing the roof tiles, floor coverings and window frames, but the choice can be daunting. Leave plenty of time.

* Get quotes. A quantity surveyor should be employed to price the work. Get three quotes for each piece of sub-contracted work.

* Working with sub-contractors. Set out a schedule, making sure you put this in writing, and do your best to keep to it while being prepared to be flexible. There will inevitably be problems with the weather and suppliers letting you down. Keep contractors informed.

* Quality control. Be on site as much as you can so decisions are made without costly delays.

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