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5 Reasons Why Self Builders and Renovators Can Benefit From the Construction Slowdown

Driven by the ongoing cost of living crisis, a surge in interest rates, and mortgage affordability challenges, the construction sector has experienced a considerable slowdown in 2023.

Survey data has shown construction activity falling at its sharpest since the height of the Covid-19 pandemic in 2020. In response to this economic uncertainty, many volume housebuilders are adjusting their strategies by scaling back on projects and buying less land.

Raymond Connor, CEO at BuildStore, says, “A slowdown in construction has always been good news for self builders and renovators, and while building your own home is not for everyone, for those with vision, there are several reasons why now could be the ideal time to get a project underway.”

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1. Availability of Land

For anyone considering a self build or renovating a wreck, the first requirement is a plot of land in a desirable location. In the current climate, land prices are dropping, and more plots are coming up as volume housebuilders put land buying on hold or rein it in significantly. Developers may also look to sell some of their land to get cash, which could create additional opportunities for self builders.

2. Inbuilt Equity

House prices have seen their biggest drop for 14 years, falling by 5.3% in the year to August, with the expectation they will fall by a further 7% next year. A huge benefit of self building is that typically a self build home is worth 25% - 30% more when finished than the cost of the land and the build, cushioning you from drops in house prices. BuildStore clients benefit from a final loan to value (LTV) which, on average, is just below 60%.

3. Future Proofing

By building your own home, you can make savings for the future. For example, while you might be paying £200 a month more on your mortgage due to rises in interest rates, you may not be paying another gas bill. The additional costs will be offset elsewhere, and your home will be more sustainable and energy efficient. You will also be living in the home of your dreams, rather than settling for anything less.

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4. Interest Rates

Bank base rate (BBR) is currently 5.25%, and self build mortgages are, on average, 1.81% above BBR with the current lowest rate 6.29%. With a self build, mortgage funds are released in stages and interest is only payable on the total amount drawn down at any stage. BuildStore’s lenders offer interest only for the duration of the build to keep costs low and the option to move onto a standard residential (capital and interest) mortgage as soon as the build is complete. There are ERC (Early Repayment Charge) and fee-free options too.

On an interest only self build mortgage with a rate of 6.29% during the build you will be looking at £1,310 per month on a loan of £250,000. This is based on the full loan amount, so you will be paying less for much of the build as you draw down the stages.

On a capital interest and repayment mortgage with a rate of 5.48% after the build is complete your payments will be £1,532 per month on a loan of £250,000 over 25 years.

BuildStore has over 60 exclusive mortgages from its panel of lenders – all building societies keen to help support homebuilding projects.

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5. Build Costs and Labour

Prices of building materials have been soaring over recent years due to Brexit and Covid amongst other factors. The good news for self builders is that building materials prices have fallen for the second consecutive month according to Building Materials and Components Statistics.

BuildStore’s cost based mortgages offer guaranteed stage payments linked directly to the build costs and agreed at mortgage application stage. Money can be released in advance, even before the work on the site is done. This type of mortgage means that self builders can take advantage of the best deals available on materials and have peace of mind that their stage payments won’t change due to lender down valuations.

Further good news for self builders is that the slowdown in construction activity means that construction workers will be more readily available to them, so their projects can get underway and progress at a faster pace.

Interested in learning more?

If you’re interested in learning more about building your own home or renovating one, why not head along to The National Self Build and Renovation Show which takes place on Friday 13th and Saturday 14th October at the Centre.

Across both days there will be a range of seminars, Q&A sessions, live demos and free one-to-one consultations with experts, and of course, over 200 exhibitors showcasing the latest building products and services.

Harvey Fremlin, Managing Director at the NSBRC says, “Our 2023 visitor survey proves that self builders are a resilient group. Forty-five per cent of visitors have not had their plans affected by the cost of living crisis, and for those that have – less than 2% have abandoned their plans – with many people instead opting to budget for additional energy saving measures such as higher spec insulation and micro renewables to generate energy (such as Solar PV).”

“Self build is not just for the wealthy, with 38% of our survey respondents having a total budget of under £350,000, with a further 30% falling into the £350,000 to £500,000 budget range – coming from a range of sources, including savings, equity in their existing homes and borrowing. The National Self Build & Renovation Centre has provided independent, impartial advice for over 16 years, and we’re seeing a genuine uplift in interest in self build, with visitor numbers and online enquiries up on last year."

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