Housebuilding Costs Too High In London

 

New timber frame houses development

If you are planning on building your first timber frame home then make sure you pick somewhere with affordable land costs, to make your budget go further.

House prices (and consequently land prices) are now so high in London that even major building companies are struggling to find the resources to start house building projects. This sore news won’t be welcomed by the thousands of people who want to build their own homes, if multinational businesses can’t afford it, how can individuals compete?

The number of companies starting new projects in the capital plummeted by 75 per cent in the last quarter, as prices for new builds fell 5.6 per cent. This means that builders are not making returns as quickly as before, which has slowed down house building significantly. This is the biggest drop since 2011.

Just over 1,200 houses were built in central London in the last quarter of 2016, with zones one and two the most affected. The news will come as a surprise as the capital has been the focus of concerted home building since the recession ended, with many new developments springing up to fulfil demand from overseas buyers.

Adam Challis, head of UK residential research at JLL blamed a number of factors. “There is a confluence of factors — weaker values hurting the revenue side of the equation for developers, who are at the same time experiencing build cost inflation which is ahead of expectations,”

“There are also concerns around what were quite toppy land prices in the past 24 months . . . schemes are really being pushed to their limits in terms of viability,” he told the Financial Times.

The introduction of new stamp duty rates also disproportionately affected the capital, which has been blamed for lack of interest from buyers, as has Brexit.

It is expected that interest will shift to outer London where land prices and construction costs are lower, and housing demand is rising.

Rising land prices

The capital isn’t the only place proving unaffordable for house builders. Land prices in Scotland also went up sharply in recent years, as it has in Wales.

If you are planning your own self-build you will know how hard it is to find a plot of land to build on, but there are a number of sites that can help. Land can become available from a wide range of sources that you may not be expecting, such as railway companies, universities, traditional landowners , the coal authority, and local district and county councils.

Make sure you keep an eye on all of these to ensure you don’t lose out on prime land that doesn’t appear on some of the more popular plot finding website.

The average cost of a self-built home including land, £255,543, is higher than the average cost of a buying a home, £255,543, but this fact can hide the reality that a self-built home is often worth 20-25 per cent more than the cost of building it when put on the market.

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