To Buy or To Build?
The average home-buyer can save £55,000 by having a three bed home built for them, compared to buying a new build from developers, according to new research from propertyfinder.com. Buying a home in England costs approximately £267,600 whereas the cost of land, materials and labour would total only £212,850 - a saving of more than 20 per cent.
The cost of building a new home ranges from £152,644 in the East Midlands to £295,054 in London. The main reason for the huge discrepancy in the cost is the price of the land. In London, a hectare of land (with planning permission) costs an eye-watering £9.6m. In the East Midlands it is just £1.9m - one fifth of the cost. As a result, plot sizes tend to be smaller in more expensive regions. In London, the typical plot size is tiny to make it affordable - just 207sqm – almost half the expansive 390sqm enjoyed in the North West where home builders can spread themselves out more.
The savings - compared to the cost of buying a new build home - vary enormously. Those in the South East save the most (£101,389), three times the average saved in Yorkshire (£33,229). London home-builders save less than average – just £43,813, a mere 13 per cent compared to buying a new build home.
Warren Bright, chief executive of propertyfinder.com said: “The regions with the most expensive home prices are not, as you might expect, where the savings from commissioning your own build are highest. The relationship between land prices and house prices is the most important factor. Getting hold of the land is the main problem. For example, land in London is so scarce - and planning permission so hard to come by - it is barely worth the cost and effort of attempting your own project. Other regions show enormous savings, especially the South East and South West.”
The cost of having a home built has risen slightly faster over the last five years than buying a new home – 48 per cent compared to 45 per cent. In London it only costs 30 per cent more than five years ago to build your own home, compared to a 79 per cent increase in the North East. This reflects the change in land prices. The cost of a plot in London has risen only 35 per cent in the last five years, while aspiring home builders in the North East must pay 3.4x the price in 2002.
Warren Bright continued: “The price of new homes has underperformed the wider housing market by 20 per cent over the last five years and build costs have risen faster than the cost of buying a new home in all regions except London. But it can still make financial sense depending where you live and how high your pain threshold is. It can be a long and difficult process to take the reins – most people have neither the time, nor the inclination. You can save more if you actually get your hands dirty and do it yourself, but that’s another order of difficulty! Other countries are much more used to having homes built than we are here. The Germans and Australians, for example, enthusiastically build and are particularly proud of the more varied domestic architecture that has resulted.”
