Building the Dream s6e4 - Are they exaggerating the profits?

[AliG]

I just watched this week's Building the Dream

 

The house was very nice and for some bizarre reason the owners sold the plot without planning permission even though achieving planning does not seem to have been contentious. I found the original planning application and there was not one comment. Indeed the original proposed house was somewhat larger as it was 2.5 storeys high although the final design was probably nicer.

 

However, they claimed to have spent £480,000 and had the house valued at £1m. On most episodes I know nothing about the area, but as a kid my parents looked at houses in Dalgety Bay in Fife. That valuation for a 220sq metre house is almost double the prevailing valuation in the street and as far as I can find the most a house has ever sold for in Dalegty Bay is £620,000. Currently a somewhat larger house with a pool, although maybe not as nice is for sale at offers over £795,000. This is in probably the most expensive street in Dalgety Bay, Donibristle Gardens.

 

Anyway, I would guess the house is worth nearer £700-800,000, still a fantastic profit, but it made me wonder if they are consistently over estimating values. As people on here often note if you self build nowadays often you just break even. The people last night will have been helped by buying the land below market.

[Barney12]

My view; undoubtedly yes. 

"tabloid TV". Its an entertainment programme which is not necessarily (if ever) technically accurate. 

[Jeremy Harris]

These programmes are all fiction to some extent (and I do have a little bit of "inside knowledge" - look at the avatar I use here).  They are primarily entertainment, and entertainment in a competitive area of programming at the moment.  There has been a steady growth in programmes like this ever since GD, and they are all fighting for a share of the viewing figures to justify the making of another series - it's how production companies work (and again, I've seen this from the way RDF operate, to quote just one production company).

 

Exaggerating house values has been normal for decades in many areas.  Down here I don't think houses ever actually sell for the Estate Agents asking price, but all people will remember is that asking price.  Few bother to check afterwards and find out what a house actually sold for, so there is a myth that houses here are worth more than they are.

 

I think this may change in future, as with sites like Zoopla etc showing the actual selling price for nearby properties (they interrogate the Land Registry sales data I think) buyers can now check on the reality of the price an Estate Agent is asking.

 

In the meantime, I think you have to take the supposed profit that Charlie Luxton ALWAYS makes a point of stressing as being exaggerated BS, intended as a bit of puff, and a hook to keep people watching the series.  After all, would the programme be popular if it showed reality, with self-builders just about breaking even?

Edited February 2, 2017 by JSHarris

[MikeSharp01]

Tend to agree Jeremy but there may, just may, be a campaigning angle to this series, unlike GD, where Charlie, or the producers, actually think that they can support the self build movement while making entertaining TV. As I think I have said elsewhere most, if not all, such programmes have a nugget or two of interest for the observant viewer - and this week for me it was the house they visited in Glasgow and the glazing in the main featured house. You do have to learn to see past the hype and make a realistic assessment of the cost / value see-saw.

[Jeremy Harris]

The snag is, that inflating the profit will just end up creating disillusionment for budding self-builders.  They will get enthused by the idea of saving a couple of hundred thousand pounds from watching this programme, come to a forum like this and then realise that it doesn't work like that for most people, and that unless you're lucky enough to get a cheap (or free) plot you're unlikely to save a worthwhile amount of money at all by self-building.

 

We decided to self-build to get exactly the sort of house we wanted, not to save money.  I suspect the same applies to the majority of self-builders, they do it to get what they want, not to make a big profit.

Edited February 2, 2017 by JSHarris

[Barney12]

11 minutes ago, JSHarris said:

 

We decided to self-build to get exactly the sort of house we wanted, not to save money.  I suspect the same applies to the majority of self-builders, they do it to get what they want, not to make a big profit.

 

Exactly this!

 

Have you also noticed how they always seem to go MASSIVELY over budget? I think this week it was nearly £150k over. And they always seem to just miraculously magic up the money. I suspect that they initially  report a below budget figure just to add an element of excitement/suspense/drama. Another point which halrdly encourages self build. 

[ProDave]

9 minutes ago, Barney12 said:

 

Exactly this!

 

Have you also noticed how they always seem to go MASSIVELY over budget? I think this week it was nearly £150k over. And they always seem to just miraculously magic up the money. I suspect that they initially  report a below budget figure just to add an element of excitement/suspense/drama. Another point which halrdly encourages self build.

If my build went that much over, a) I would not be able to afford it, and b) it would make the house cost massively more than it would ever be worth.

 

all these programs show is how modest and how cheap my build is compared to many self builds.

 

I could point you to one self build up here that I expect will have cost nearly double what the house will be worth, mainly because of how he acquired the "plot" and how much he paid for it.
 

[AliG]

Yes, my main concern is that they are giving people false expectations of the profits to be made and like most people here I am building to get the house I want, I am probably spending more than I can sell the house for.

 

Indeed recently some of the suggested budgets given by people on the show are absolutely fanciful at well below £1000 per square metre. I seem to remember one episode though where the people claimed to budget around £250,000 for a 350-400sq metre house That's just ridiculous. Last night's house was 220sq metre according to the plans plus a double garage with room above, around 260sq metre in total. The build cost was thus quite high at around £1700 a metre.

 

Maybe they are told to underestimate the budget to sound interesting Dave. As you say few people would be able to afford to go 30% over budget. When I looked at the Fife planning portal the original approved plan was for a 320 sq metre house and I suspect that they scaled this down due to budget constraints.

 

I also question if they really give all the spending. A quick google suggests last night's house was architect designed, although the architect didn't get a look in on the show. If I look at my build, architect, SE, ground reports etc are close to 10% of the cost. Also I haven't ever seen any mention of stamp duty on the cost of plots.

 

Still it doesn't stop it being interesting and entertaining and giving us all ideas of how to spend even more money! I am concerned I just don't have enough LED lights everywhere now!

 

Edited February 2, 2017 by AliG

[Jeremy Harris]

I wrote  blog entry a few weeks ago looking at the rough costs of architects, project managers, consultants etc and reckoned that we'd saved around £50k by not using any.  Someone pointed out, quite rightly, that I'd sort of double accounted for some of the potential saving, which I accept, but I still think we saved around £40k to £45k as a consequence of my efforts.  What's more, unlike the cost savings from my direct labour during the build (I've estimated I worked for around £2/hour on that!) the cost savings by me doing the design, drawings, planning permission, building control, project management etc worked out at closer to £30/hour, more than I get from my pension, and so a very worthwhile saving indeed.

Edited February 2, 2017 by JSHarris

[pulhamdown]

2 hours ago, AliG said:

I just watched this week's Building the Dream

 

The house was very nice and for some bizarre reason the owners sold the plot without planning permission even though achieving planning does not seem to have been contentious.

 

 

 

The fact that the beach just across the road from the house has radio active contamination from breaking up 800 planes after WW2 might just have something to do with it.  It may not be a huge risk, but I think the house owners are taking a big gamble.  It may not turn out to be worth anywhere near a million pounds

 

Colin

[AliG]

I had never heard about the radiation, seems like the MoD are now cleaning it up.

 

It's a very nice commuter area, but it's pretty out of the way and expensive for what it is. The views are fantastic and the house last night made a lot better use of them than the developer built houses in the area.

 

The quoted million pound price is £425 a square foot ignoring the room above the garage. It looks like the prevailing price in the street is closer to £250 a square foot and I don't see anything has ever sold for over £300 a square foot in Dalgety Bay.

 

You can buy houses in nice parts of Edinburgh for under £300 and even the most expensive streets rarely go over £350 a square foot. Only high spec flats pass that kind of price.

 

There are a few places around Edinburgh which are pleasant but full of commuters and to my mind overpriced when travel time is taken into consideration. Many of these places have massively unperformed price wise in recent years as I think historically prices were propped up by incomers from England who were used to longer commutes. As these have dried up the prices differentials have increased.

 

I may be biased but there are very few jobs in Fife that could support a £1m house and in the morning you are looking at up to 1.5 hours to get to Edinburgh. You can buy a much larger house in Edinburgh for the quoted price. That's a no brainer unless you like to spend 20% of every weekday commuting.

[jamiehamy]

6 minutes ago, AliG said:

I had never heard about the radiation, seems like the MoD are now cleaning it up.

 

Where have you been hiding?! Certain political party loves dragging it up like it actually happened yesterday! Dalgety Bay and Kinloss. 

[Stones]

You have to remember that there are usually two values for any house, its market value, and its value for insurance purposes.

 

I do wonder whether it is that usually higher insurance value figure that is used by the production company.

[Jeremy Harris]

9 minutes ago, Stones said:

You have to remember that there are usually two values for any house, its market value, and its value for insurance purposes.

 

I do wonder whether it is that usually higher insurance value figure that is used by the production company.

 

That's a very good point.  When we insured our new house, the insurers questioned the rebuild value.  I told them that we'd built the house, and knew how much it cost to build, so had set the rebuild value at that cost plus inflation plus demolition cost.  They seemed to think the rebuild cost should have been a fair bit higher, and as it didn't change the premium at all, I just let them get on with it........................

Edited February 2, 2017 by JSHarris

[jack]

A guy I know in West Sussex has planning approved for a huge (~400m²) modern house in the country.  It seems to be mostly glass.  A friend put him in contact with my wife and I because we were just finishing our build.

 

They plan to use a main contractor for everything - they literally won't hammer a single nail in themselves - and everything is pretty high spec (eg, £50k kitchen).

 

Their initial budget was something like £1200/m².  We told them it was "perhaps optimistic" but they thought that with some careful trimming and good negotiating they'd get there. 

 

They then went out to get quotes, and, quelle surprise, the quotes are all way north of £2000/m².  They now don't know what to do, as their initial budget was pretty well all they could afford.

 

Worse, they're blaming the people doing the quotes - "They think that just because it's a big house we must be rich and they can lump on a ridiculous premium".

 

Oh, and they can't afford to build this house, but he's just bought himself another new BMW only 3 years after the last one.  

 

I think that's the thinking that leads to the silly overruns on TV shows.  I don't think the producers are putting them up to it to make better TV, I just think that most people have never done this before and don't believe the guideline per sqm costs that you get in, eg, self-build magazines.

[jamiehamy]

22 minutes ago, JSHarris said:

 

That's a very good point.  When we insured our new house, the insurers questioned the rebuild value.  I told them that we'd built the house, and knew how much it cost to build, so had set the rebuild value at that cost plus inflation plus demolition cost.  They seemed to think the rebuild cost should have been a fair bit higher, and as it didn't change the premium at all, I just let them get on with it........................

We extended our build insurance recently - when we took it out initially, I srt the rebuild value as your budget. When I came to extend it, I realised tht should the worst ever happen, there was no way I'd spend over two years of my life doing it again, so I upped it to the worst case BC valuation (nearly double our budget!) - which even then might be a bit low. I didn't bother about what the house might be worth but expect we'd probably break-even with a builder (just). 

 

Doing it ourselves almost entirely, we would most certainly make money if we ever sold - but - we got the land for a song (without PP). 

 

 

[Ferdinand]

4 hours ago, AliG said:

I just watched this week's Building the Dream

 

The house was very nice and for some bizarre reason the owners sold the plot without planning permission even though achieving planning does not seem to have been contentious. I found the original planning application and there was not one comment. Indeed the original proposed house was somewhat larger as it was 2.5 storeys high although the final design was probably nicer.

 

However, they claimed to have spent £480,000 and had the house valued at £1m. On most episodes I know nothing about the area, but as a kid my parents looked at houses in Dalgety Bay in Fife. That valuation for a 220sq metre house is almost double the prevailing valuation in the street and as far as I can find the most a house has ever sold for in Dalegty Bay is £620,000. Currently a somewhat larger house with a pool, although maybe not as nice is for sale at offers over £795,000. This is in probably the most expensive street in Dalgety Bay, Donibristle Gardens.

 

 

It seems to be a consistent theme that a number of people suffer a financial bloodbath in these programmes, but others double their money.

 

eg on GD the chap with the Geodesic Dome in the Lakes seems to have suffered. Was it Whitehaven?

 

While the chap with the Yoghurt and Scorched Wood gobbled-bungalow tower house in the woods on the Isle of Wight doubled his money in a few years. This second chap chose the worst place on the best road.

 

I would venture that it is all to do with the local market, and that nothing done on the GD or BTD house adds anything to the value wrt the market - merely detracts less.  Some of the difficult projects *do* make a difference, but that could be the same with a conventional house and is due to the innovative people.

 

ie Correct .. do it for blood not treasure.

 

Ferdinand

 

 

Edited February 2, 2017 by Ferdinand

[Jeremy Harris]

 

27 minutes ago, jamiehamy said:

We extended our build insurance recently - when we took it out initially, I srt the rebuild value as your budget. When I came to extend it, I realised tht should the worst ever happen, there was no way I'd spend over two years of my life doing it again, so I upped it to the worst case BC valuation (nearly double our budget!) - which even then might be a bit low. I didn't bother about what the house might be worth but expect we'd probably break-even with a builder (just). 

 

Doing it ourselves almost entirely, we would most certainly make money if we ever sold - but - we got the land for a song (without PP). 

 

 

 

In our case the insurers had no change in premium for any rebuild cost under £500k, so I just let them set it at £500k, rather than argue about it.  However, what you say makes a hell of a lot of sense, as there's is NO WAY I'm going to do this again!  If the worst happens, we'll move into a hotel and let a builder re-build the house.....................

Edited February 2, 2017 by JSHarris

[Ferdinand]

32 minutes ago, jack said:

A guy I know in West Sussex has planning approved for a huge (~400m²) modern house in the country.  It seems to be mostly glass.  A friend put him in contact with my wife and I because we were just finishing our build.

 

They plan to use a main contractor for everything - they literally won't hammer a single nail in themselves - and everything is pretty high spec (eg, £50k kitchen).

 

Their initial budget was something like £1200/m².  We told them it was "perhaps optimistic" but they thought that with some careful trimming and good negotiating they'd get there. 

 

They then went out to get quotes, and, quelle surprise, the quotes are all way north of £2000/m².  They now don't know what to do, as their initial budget was pretty well all they could afford.

 

Worse, they're blaming the people doing the quotes - "They think that just because it's a big house we must be rich and they can lump on a ridiculous premium".

 

Oh, and they can't afford to build this house, but he's just bought himself another new BMW only 3 years after the last one.  

 

I think that's the thinking that leads to the silly overruns on TV shows.  I don't think the producers are putting them up to it to make better TV, I just think that most people have never done this before and don't believe the guideline per sqm costs that you get in, eg, self-build magazines.

 

Being a touch simplistic, he seems to have 3 options:

 

1 - Build it smaller.

2 - Build it cheaper.

3 - Build it all himself.

 

And those will all struggle to reduce it by 50%.

 

Or go ahead and win a financial Darwin Award.

 

Ferdinand

 

[AliG]

Champagne tastes/beer budget springs to mind.

 

When I was a teenager and doing my paper round I noticed that there was a very strong correlation between the value of people's cars and the value of their houses. The correlation changes depending on the value of houses in the area and would not work in London, but even if I look at my current street there is a pretty good correlation. There were a couple of notable outliers where people had cars worth an enormous percentage of the value of their houses. Generally speaking if you drive a BMW 3 Series I would not expect you to have a 400sq metre house which is way larger than average.

 

I did have a quick look and see that West sussex houses seem priced at around £400 a square ft so it is an expensive area for housing. It shouldn't affect build prices that much but I am sure it does. I know someone who spent over £10000 a square metre to build a basement in Chelsea. He said it was OK as it would increase the value by more. I kept asking why did the build cost go up with the selling price!

 

50k on a kitchen is a bit excessive excessive for a 400sq metre house. I wonder if we did a survey here how many people's kitchens cost 60% more than the list price of their car (list price not depreciated price). If you translated the kitchen price to other fixtures and fittings you can see where the money is likely going. That along with a high percentage of glass.

 

I am sure they could bring the cost down to £1500 with design and specification changes. You should be able to build a very nicely specified house for that price. 

 

 

 

 

[MikeSharp01]

I am sure that many will realise that self building is not for them - self building is not for the feint hearted - well you don't see them on here do you, but some will be prompted to give it a look and then give it a go. Like most of us here we are not trying to make a profit, we have targetted our build cost, everything, at the average selling price for similar sized houses in the location we are building. Although the other half got a shock the other day when she spotted that the house opposite, slightly smaller than our build, is up for £100K above the average selling price. We have a 10 year view and have worked out energy, servicing and house price fluctuations in our model which helps us be confident that we will both have the home we want at a cost we can afford in the medium term - our offspring will get the benefit if there is any. We are targetting £1200 m² and the budget is running out just below this on the progress / spend line, we are doing as much of the work as we can ourselves to manage cost and ensure quality.

 

Budget is everything as you might expect and if you are not up for some of the heavy lifting (not literally) you can expect to pay top dollar. @JSHarrisI think there are many ways to skin a cat in terms of how you apportion that budget. We are, in effect stick building, so have an on board SE - but I guess / cannot recall from your blog, you had your SE work done as part of the timber frame package. We don't have the aesthetic skills to think through a properly proportioned building within the envelope we have so chose to use an architect (the full RIBA package as far as detailed drawings). We will always live in a one off architect designed home and that does have a market value albeit indeterminate, I am not sure we have direct value for money but the 10% (Architect and SE) of the cash budget is going to be about it on our build. So we have those two but won't need spend in other places, we have no difficult ground (yet), we have mains water, sewage, gas and a PME mains supply (could have three phase if we wanted as its on the pole that is on our land) so we saved there. I have costed my time into the budget using a mixed mode formula - I could be earning elsewhere if I wished to but luckily don't need to, so it is part of the build cost. I did wok out a formula to cost each of the trades against my time and my estimated efficiency against a full time pro but it got silly / complicated so I abandoned it and just put in a figure based on a simple analysis of the housebuilders bible.

 

 

[jack]

1 hour ago, Ferdinand said:

1 - Build it smaller.

2 - Build it cheaper.

3 - Build it all himself.

 

Despite the fact that he's semi-retired, I suspect he's in no way handy enough to do skilled work, nor is he fit enough (or interested enough) to even be a labourer on the job.  I'll be surprised if they're willing to compromise much on size or finish enough to make it fit their budget.  It's definitely all about "the dream" for them.  

 

31 minutes ago, AliG said:

Generally speaking if you drive a BMW 3 Series I would not expect you to have a 400sq metre house which is way larger than average.

 

Ah, but I didn't say a 3 series, I said 3 years.   Someone else told me about the beemer but didn't mention the model.  I very much doubt he's the type of guy that would drive a base model 3 series - more likely something quite a bit larger and/or sportier.

 

31 minutes ago, AliG said:

50k on a kitchen is a bit excessive excessive for a 400sq metre house.

 

Depending on where you buy, £50k isn't that expensive.  We went to Roundhouse kitchens, for example, and the absolutely cheapest deal they could do for us was over £35k for our kitchen.  That was an all-painted finish - no wood veneer anywhere.  I don't doubt that the design and fitting would have been top notch, but it was a lot more than we ended up paying for a decent quality kitchen with lots of wood veneer and a huge stone island.

 

31 minutes ago, AliG said:

I am sure they could bring the cost down to £1500 with design and specification changes. You should be able to build a very nicely specified house for that price. 

 

The big issue, I think, is that the amount and position of the glass required a lot of complicated steel work.  Most firms they approached wouldn't even quote.   

 

31 minutes ago, AliG said:

I wonder if we did a survey here how many people's kitchens cost 60% more than the list price of their car (list price not depreciated price). 

 

Our kitchen cost well over twice what we paid for our car, although from memory it was nearly two years old when we bought it and is an estate so had experienced huge depreciation.  Looking around at our friends in the same town, on average our car is worth a lot less than theirs and our house is worth a moderate amount more.  Despite being a car lover, I've never been able to justify the high cost (depreciation, in particular) of buying expensive new cars.  I tend to buy 1.5-3 year old Japanese cars, which are boring to drive but decent value and ultra reliable.

Edited February 2, 2017 by jack
Changed a couple words to help keep things anonymous

[jamiehamy]

I must confuse people with my battered old 250k mile Corrado sat outside when we work...I genuinely think people think I'm the labourer if they see me when they pass by.

 

I don't have any intention of getting rid of it either

 

@jackBuy it once, keep it forever. Depreciation becomes irrelevant after 10 years or so. 

 

[jack]

11 minutes ago, jamiehamy said:

 

@jackBuy it once, keep it forever. Depreciation becomes irrelevant after 10 years or so. 

 

Exactly.  I should say that we've had this car for over 4 years and expect to have it for another few.  I don't see the point in upgrading only to kick off the worst of the depreciation again.  Japanese cars are great in this regard, as in my experience they go forever and don't seem to suffer the string of niggly little failures that seem to need attention on European cars.  I had a Peugeot once, and it had three separate trips to the garage under warranty.  In each case, the thing that set off the engine light was a sensor failure, and a different sensor each time - insane!

 

The only thing that might tempt me to get rid of our second car (a small, beaten up old Toyota) would be a good deal on a plug-in or plug-in hybrid, given the amount of PV we have on the roof.

[AliG]

This is a whole new debate.

 

The average new car in the UK costs £29,000, the average house in the UK costs £220,000 which is massively inflated by London. So the average new car costs more than 10% of the cost of the average house.

 

However, for people who live in detached houses like self builders the average car/house value is probably more like 6-7%. As houses get more expensive the relative value of cars tends to fall.

 

And for some of you tightwads who like driving around in antiquated cars the figure is considerably less 

 

In all seriousness I know that driving an old car massively reduces depreciation costs, but newer cars are generally much nicer and safer to drive and sadly there is an intangible feelgood factor that I am happy to pay up for. What I try to do is to drive an expensive car with low depreciation, but basically they're my weakness!

 

BTW I read an article a couple of years ago about people being more and more willing to spend £100k on kitchens. It's crazy. They are usually a little bit nicer but I feel a lot of it just goes into profit margins, commissions etc. So you're right Jack £50k isn't that much at some places, I would still argue it's way more than necessary and certainly one of the first things to go if you can't afford to build the house you would like.