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Houses are still too costly for first time buyers. But they're losing their value at a rate that's worrying for new homeowners. The cost of running a house is too high; the number of people selling them, too low. And mortgages are too expensive.
But for one distinct sector of the UK property market, everything - I am told - is 'just right'.
While the bottom drops out of the residential property market in what might or might not turn out to be the most ugly and undignified economic prolapse ever suffered by the great middle classes' hearthside economy, the self-builders, the frontiers-people of the housing market, the men and the women with a dream... these people are finding themselves in an uncharacteristically privileged position. After decades of being treated like wacky longhairs, suddenly they're getting the best tables and being offered the specials. Why? They don't need to turn a profit. Their profit's built into the build.
How it works
If you or I want to buy a house, we need to either have amassed enough equity in a previous property purchase and not mind losing some of it if the market continues to fall, or risk negative equity and manage to convince a lender to share that risk.
Developers, of all sizes, also need to protect their margins. Right now, credit's expensive, materials are expensive, building's expensive as the Government piles on the eco-requirements. Protecting that margin is hard when, at the other end of the deal, after the building's complete, it's impossible to forecast how quickly units will shift, and at what price.
But for self-build, it's different. Self-builders are building homes. To live in. From their point of view (assuming they really are self-builders and not small-time developers in sheep's clothing), they don't need to make a profit... at least not a conventional one. They make their profit simply by moving into exactly the house they want for the price they want... a significant percentage less (assuming they haven't screwed up on the ordering or been stiffed by the team) than they would, had they been forced to pay for something similar to what they want on the open market.
From a lender's point of view, and in the current climate, this kind of an enterprise suddenly looks like a relatively safe bet. The protection - or, from a lender's point of view, the added value - is "built" right into the build process, and the self-builder’s able to take much longer term view than the developer.
Which is why self-builders are still getting loans. According to experts, this particular market has been left relatively untouched by the mortgage crisis.
Different beast
The self-build mortgage is a slightly different beast to the conventional mortgage, with the loan released in stages (for plot purchase, materials etc). Traditionally, the money's been released in arrears, adding to the already demanding logistics of the project by creating all kinds of cash-flow problems.
While the traditional mortgage sector's been shrinking fast, a number of new self-build products have materialised, some releasing the cash in advance (a loan effectively aimed at those with less equity going in). And this is one of the few places you'll find new self-certification products, or 95% mortgages.
In fact, the credit crunch might, in specific ways, be helping self-builders.
The availability of skilled labour is likely to go up and its cost come down as developers lay off workers. Similarly, the number of available plots is increasing, as commercial builders down-tools and look to go liquid. Over at the Buildstore - the supplier to self-builders - I'm told the Plotsearch land database has seen a 20% increase in new plots since January... an unprecedented increase, coinciding with the difficult market.
Shelling out
If the crunch remains crunchy enough, we could see the emergence of a new product. In the past, at least in the UK, apartments in shell form have been the preserve of high-end property purchasers, who'd rather send in their team of interior designers than live with someone else's taste. Now, there's an incentive for developers to cut their loses and sell unfinished developments, even parcels of land, direct to the self-build community, who – again, with a longer term view – might be able to take advantage of credit, VAT exemption and vastly lower land Stamp Duty.
In York, Magna Holdings is selling individual shell apartments in a large period building for £300,000, and marketing the properties to self-builders. They're also selling empty plots with planning permission. Although Magna's Chris Lee tells me the plan had always been to split the building and sell as shell, he admits that, in the current climate, it's a move we might see more and more.
Self-build isn't for everyone. It's complex, packed with the unexpected, and very, very gruelling. But those with the expertise, time and energy to get from plot to property can at least be assured that, right now, they're possibly not embarking on the very riskiest route to a home.
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