Is it cheaper to have a home built

RISING house prices have caused buyers to resort to building their own home instead.

According to the Office for National Statistics, the average house price has rose by 10.9% over the past year to £277,000.

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A stamp duty holiday during the Covid crisis and a lack of homes to buy has caused buyers to lock horns in bidding wars - driving prices up.

It means people are looking for different and cheaper ways of getting onto the property market.

You could potentially save your cash by taking on the ultimate DIY project and building your own home.

But make sure you factor in the hard work and extra fees involved - we explain everything you need to know.

How much does it cost to build a house?

It's estimated that the building costs are between £1,800 and 3,000 per square meter.

The average UK property (a three-bedroom house) measures 800sq ft or 74sq meters, a self-build will cost between £133,000 and £222,000.

You should put aside an extra 15% to pay for engineers, architects and any other professionals needed. You should also consider putting an extra 10% on top of that to cover any unforeseen costs.

Self-builders should also take into account fees which include planning applications, lawyers, demolition and self-build insurance.

A planning application will be £462 if it is approved immediately, but can run into thousands if there are appeals or council push back.

Site surveys and reports from structural engineers can be £500 a pop, while self-build insurance is approximately 1% of total costs.

The final bill for demolishing or clearing the site can run into the thousands.

To purchase somewhere to build, you must pay Stamp Duty Land Tax on land worth over a certain price.

In England or Northern Ireland, the current threshold for residential land tax is £125,000.

If you're already a home owner you may have to pay 3% on top.

You also need to consider construction costs.

The superstructure - which includes the roof, roof beams, walls and external cladding - usually takes up 30% of the budget.

Timber frames rather than the cheaper brick and block can cost 50%.

Foundations and flooring will make up most of the remaining 70%.

On average, the roof and kitchen will cost between £5,000 and £6,000 each.

A ensuite bathroom can cost about £1,500 but if you upgrade any fittings or have anything higher spec it could be £6,00.

Wiring can also cost between £3,000 to £5,000 depending on the size of the house.

Is it cheaper to buy or build a new home?

Building your own home can be much cheaper than buying an existing house.

If you do the work yourself, you can lower costs by up to 40%.

But even hiring builders to do most of the work can save money, while project managing the build can also significantly cut costs.

You pay less Stamp Duty because you are taxed on the value of the land, not the completed property.

This can be worth 20% more than the costs of the land and construction.

You can also claim back the 20% VAT charged on some of the materials.

However, mortgage costs will be higher. Some two-year fixed and variable rate deals start around 5%.

In Wales you can get loans worth up to £400,000 to help cover the cost of building their own home under the Self Build Wales scheme.

What is the cheapest type of house to build?

Smaller will of course be cheaper, but even small will be bigger compared to buying one pre-built.

A self-built house of 150sq metres would still be larger than an average 100sq metre, four-bed house from a developer.

To maximise space especially on a modest plot, it’s best to build a house rather than a bungalow unless you really need just one floor for mobility reasons.

A bungalow has the same foundation, roof and first-floor wall costs, but you get a much smaller property.

A simple design like a Georgian-style box house will limit the need for expensive architects.

You can also save thousands of pounds by opting for blockwork walls, an attached garage and a simple heating system.

Following these principles you could build your own for less than £150,000 – a fraction of the cost of buying one for sale.

Can you get a mortgage to build a house?

Yes, you can get a self-build mortgage.

However, it does work differently as the lenders main security, a house that they could repossess, doesn't exist.

Therefore, if the lender released all the money at once they would be at risk.

Instead self-build mortgages release the money in instalments. The instalments fund each phase of the construction.

With some self-build mortgages, the money will be released in advance, i.e. the money towards the foundations is released before the foundations are laid.

Or, the money can be released in arrears, therefore you pay for the construction from your own pocket but can claim the money back when the next instalments paid out.

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