When going on the hunt for your future home, the choices can be overwhelming. Where should it be located? What is your idea of the perfect home? How big should it be? What features should it have? Do you want an apartment or a house? And, an important consideration, what can you afford?
Another choice that comes up is whether to purchase an existing home or a newly constructed home. For people looking to buy in well-established city or urban areas, the most likely option is to buy an existing home or apartment. However, as urban areas expand outwards and new land is made available for residential use, purchasing a home from a property developer, or purchasing land to build your own house on it, becomes an option. In this article, we will look more in-depth at the latter option. In particular, what some of the opportunities and difficulties of getting your own home built are, and contrasting the approach towards self-building in the UK and other countries.
Purchasing a home from a property developer can be attractive because the property developer takes on the purchase of land, the construction process and the cost of building your future home. In the end, you pay for the finished product and move in. This has long been one of the most common way of buying a property in countries such as Spain and Portugal, especially in coastal areas. The downside of purchasing a home from a property developer is that by the time you come along to purchase the finished product, there is not much you can say about the size of the bedrooms or the overall layout of the home. Most property developers will start marketing properties before they are completed though, and you often get a say on finishes such as the kitchen cabinets, flooring, or paint colour.
This brings us to the allure of building your own home! What if you got to choose everything about the design and layout of your new home? What if you could decide whether you wanted a Victorian or a Tudor style home, or perhaps something a bit more contemporary? What if you could decide to have two bedrooms but a large garden because it’s just the two of you, or you rather want to build a two-story home with four bedrooms because your family is growing?
This is what makes self-build homes so attractive, but how realistic is it in the UK, where land prices are high and the rules for self-build can be a little convoluted?
Looking at the low prevalence of self-build in the UK, this is an important question. According to a 2013 study by the University of York, as few as 12,000 self-build homes were being completed per year in the UK, accounting for only 7.6 percent of new homes built per year.
This compares quite poorly to the rest of Europe where there is a much higher proportion of people building their own homes. The University of York study cites statistics of 52 percent in Hungary, 38 percent in France, and 30 percent in Sweden – that is quite a contrast! While the University of York study is now eight years old, and the cited statistics of other countries even older, more contemporary sources do not seem to indicate there have been any major changes since then.
As early as 2011, the UK government set a target of doubling the number of self-build homes in its Housing Strategy for England. Then, in 2015, the government passed legislation called the Self-Build and Custom Housebuilding Act to extend this aim even further. Most recently, Member of Parliament Richard Bacon has been working on a review of progress to date that will be submitted to the Prime Minister in July this year. While this seems promising, the UK is still a long way behind some other European countries when it comes to self-building.
The reasons for the low prevalence of self-build in the UK compared to the rest of Europe comes down to several factors. Land supply is the first barrier that gets cited. In the UK, less land is made available to individual buyers. There seems to be an overall preference to offer land to property developers than individuals. The opposite is true in parts of Europe where local governments are more likely to open up the sale of plots of lands to individuals. That is not to say that property developers don’t play a role in the rest of Europe, but that this happens in different proportions.
Access to finance is another key issue. The University of York study, and subsequent sources, cite how UK lenders perceive self-build loans to be a high risk. This is understandable from the banks’ perspective since it is certainly easier to deal with experienced property developers compared to an individual who has never built a home before and probably never will again. In comparison, in the case of German and Austrian models, banks have highly specialised loan programs for individuals wishing to build their own homes. These loans – essentially stage loans – are well-known and even ordinary people dreaming of their own home can easily find information on how they work. Because of how common self-building is in these countries, builders are also adept at working within the terms and conditions of these loans.
Related to this is the issue of planning permissions and zoning of properties. Many of the sources available, including the University of York study, all cite how complicated and expensive this tends to be in the UK and, by contrast, how much more user-friendly these processes are by comparison in other European countries. Regulation surrounding town planning and zoning of properties are not getting less in any country, but the distinction seems to lie more in how normalised the model of self-building homes is. If less than 10 percent of homes being built in the UK are self-build versus over 50 percent in another country, the likelihood that processes are simpler, and that people are more familiar with them, is higher.
As important as factors of land supply, financing, and ease of navigating the planning process and regulations are, the main cause of the difference between the UK and other European countries seems to boil down to national psychology. In the examples of Germany and Austria, there is simply a culture of self-build in these countries. It is seen as a norm by local authorities when they plan towns and cities, it is seen as a normal route to homeownership by everyday people, and it is seen as the norm in the construction industry by banks, lawyers and real estate professionals.
This means that if you don’t mind undertaking the effort of doing some research into the rules and regulations for self-build abroad, there are great opportunities in other countries for getting that dream property exactly as you’ve designed it. The upshot of this is, if you decide the rules and regulations for self-build in the UK are too restrictive, you might decide you would be better off packing your bags and seeking that perfect plot of land in foreign climes.
But remember, if you do end up taking the plunge and buying a piece of land abroad, always make sure you get the best exchange rate you can and avoid wasting money needlessly on expensive bank fees. With self-building, you’re likely to need money for an initial land purchase, and then subsequent tranches of funds to pay for design, permits, legal advice, and – of course – building materials. It makes sense to avoid paying fees unnecessarily on each transfer, so, if and when you find yourself in a position where you are ready to make a move, be sure to give us a ring and we’ll tell you how we can easily arrange a funds transfer to get your self
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