Self build affordability in a higher interest rate world.

[saveasteading]

I don't like to confuse. What can I be clearer on?

Saying S106 without explanation is bad of me... Section 106 contribution ....developer payment as part of a planning condition for works or for the community.

[saveasteading]

3 minutes ago, Indy said:

anyone who bought in the last 2-5y, their financials won't stack up anymore 

You think a lot of people have bought sites for self build, got planning permission but can't , or decide not to, proceed?

Makes sense, but I wonder if the numbers are high.

[Indy]

9 minutes ago, saveasteading said:

I don't like to confuse. What can I be clearer on?

Saying S106 without explanation is bad of me... Section 106 contribution ....developer payment as part of a planning condition for works or for the community.

It wasn't s106 part that was confusing - my point was more focussed on whether land prices will go down or not really. 

 

[Marvin]

On 11/01/2023 at 19:00, gavztheouch said:

This would imply wages have to rise at least 50% now or material prices need to halve.

Hi @gavztheouch

 

In my humble opinion labour rates, material costs, property prices, energy costs and interest rates are all unstable and there are too many variables at play at the moment to make a determination as to which will do what when. 

 

However one thing that is not going to suddenly change is indebtedness, from a personal, local government, country or world view point. With this in mind I conclude that things cannot avoid becoming financially tougher, even though I feel that interest rates will go down from here (mainly because of the economic hit on indebtedness due to interest rates) and may well go seriously up along with inflation later next year.

 

You may have noticed that Travis Perkins has issued a warning about trading conditions, and I can think of three others associated with property that I expect to hear the same from.

 

[Alan Ambrose]

>>> You may have noticed that Travis Perkins has issued a warning about trading conditions

 

Interesting - a report below. I find the guys in my local TP fairly helpful, so maybe the squeeze will sharpen pricing and encourage service even more.

 

• Sees FY profit down 19%-27%
• Q3 pricing declines 3%
• Shares down 12%

LONDON, Oct 11 (Reuters) - Travis Perkins (TPK.L), Britain's biggest supplier of building materials, downgraded its annual profit forecast by as much as 27% on Wednesday, blaming ongoing tough conditions in the new-build housing and renovation markets, hitting its shares.

The group said it now expected 2023 adjusted operating profit to be in the range of 175 million pounds ($215 million) to 195 million pounds, down from the 240 million pounds it had guided to in June, itself a 12% downgrade.

 

"Market conditions remain challenging with continued weakness across new build housing and domestic repair, maintenance and improvements," Chief Executive Nick Roberts said in a statement.

Shares in Travis Perkins sunk by as much as 12% in early deals, hitting their lowest level for over three years.

Britain's housing market has cooled this year after a jump in interest rates, which is deterring house-building and dampening the house sales that often prompt improvement work. Moreover, a squeeze on disposable income means consumers are not spending on their properties.

[Kelvin]

TP prices have reduced too. I’m getting ply much cheaper than 6 months ago. 
 

Whether we see a wholesale reduction in materials prices is debatable. None of the input prices have reduced so it’s reduced margins. Some materials have huge margins some don’t. It’s possible that trades will reduce labour rates and become more available. I’ve yet to see that as all the trades round me are still flat out. 
 

We certainly built at the ‘wrong’ time, if there’s ever a right time. I managed to avoid the worst of the inflation by hedging some of my big ticket purchases and buying them last year but prices were still high due to availability post COVID. 
 

we aren’t going to make money on our house but it also won’t cost us anything and it’s better than we could ever have bought. 

[saveasteading]

55 minutes ago, Indy said:

whether land prices will go down or not really. 

 

Ok. I believe this strongly but have trouble convincing certain parties, so maybe I'm wrong.

Simplistically, a developer works out the build cost, plus overheads and profits. Subtracts that from the target sales price and is left with the land cost. Get it cheaper for extra profit. Dearer, no deal.

If the LA applies additional S106 requirements then that increases the build cost, and can simply come off the land value.

There may be no deal of course, but in time the landowners might reduce their exoectations. SE building land is £10k an acre as farmland and £1M for housing, so it wouldnt make so much difference to profit.

Thus the LA has one chance to benefit the locality but tends to be wimpish about it. Hence schools , doctors , roads, water supply don't cope.

Windfall taxes have always withered away, obv under pressure from those who would pay it.

[LSB]

19 hours ago, saveasteading said:

Ok. I believe this strongly but have trouble convincing certain parties, so maybe I'm wrong.

Simplistically, a developer works out the build cost, plus overheads and profits. Subtracts that from the target sales price and is left with the land cost. Get it cheaper for extra profit. Dearer, no deal.

If the LA applies additional S106 requirements then that increases the build cost, and can simply come off the land value.

There may be no deal of course, but in time the landowners might reduce their exoectations. SE building land is £10k an acre as farmland and £1M for housing, so it wouldnt make so much difference to profit.

Thus the LA has one chance to benefit the locality but tends to be wimpish about it. Hence schools , doctors , roads, water supply don't cope.

Windfall taxes have always withered away, obv under pressure from those who would pay it.

prime farmland is 20k acre, not 10k and that's productive land with no chance of building, any parcel of land that farmers don't want is more than that even as amenity / small-holder land just because 'they don't make it any more'

That's in East Anglia and I can't imagine it's much less anywhere that farming can still be profitable.

 

[Kelvin]

36 minutes ago, LSB said:

prime farmland is 20k acre, not 10k and that's productive land with no chance of building, any parcel of land that farmers don't want is more than that even as amenity / small-holder land just because 'they don't make it any more'

That's in East Anglia and I can't imagine it's much less anywhere that farming can still be profitable.

 

Average arable farmland is £10k-£11k per acre in England and Wales

[saveasteading]

Whether 10k or 20k, my point is the same. £1M is a lot more.

Elsewhere though, it isn't that much, but the building still costs much the same. That would be interesting to hear from our nationwide correspondents.

[Jilly]

An approach which is more insulated from interest rates is to save loads by living on site in a static, and go slowly, ‘ build as you earn’  in effect. By trying to stay out of debt and avoiding loans if possible, you can take your time researching prices and doing as much as possible yourself. This approach is tough and isn’t for everyone and depends on your income and ability to rough it. 

[ToughButterCup]

22 minutes ago, Jilly said:

...., ‘ build as you earn’  in effect. By trying to stay out of debt and avoiding loans if possible,...

 

Exactly what we're doing.

I realise that we are over-privileged in self build terms: all I've done for the last eight years is get up and try to get on with the build. We've had some horrible lows - but some very heady moments too. It takes focus, persistence and a rock-solid partnership.

 

There comes a stage when you are so committed to the project (sunk costs, emotional and financial) that you just can't stop. 

[saveasteading]

27 minutes ago, Jilly said:

build as you earn’

One extreme end of the cost ranges we see on here.

The other is getting it done by professionals and main contractors....but that isn't really self build.

And all variations in-between.

Are we saying £1k to £4k per m2?

 

The other thing about diy is that payments to builders are out of your already taxed income.

But there is so much to learn. I've been in many aspects of construcion all my career (and before) and am still learning a lot.

[Buzz]

29 minutes ago, saveasteading said:

The other is getting it done by professionals and main contractors....but that isn't really self build.

And all variations in-between.

Are we saying £1k to £4k per m2?

Totally agree 👍 

If your only input is picking and choosing what you want to build and what materials ,finishes you want then hand it over to someone else to PM and build it and you just pay the invoices as they arrive I struggle to see how that could be classed as a self build .

All you have really done is commissioned a new build.

 

[LSB]

2 hours ago, Jilly said:

An approach which is more insulated from interest rates is to save loads by living on site in a static, and go slowly, ‘ build as you earn’  in effect. By trying to stay out of debt and avoiding loans if possible, you can take your time researching prices and doing as much as possible yourself. This approach is tough and isn’t for everyone and depends on your income and ability to rough it. 

or, we saved about 75% of the expected build cost before and also do build as you earn for the rest.  At least that way we get to live in our house, which although old and cold is paid for totally and is more comfortable than a static.

We have been lucky with inheritance from both sides of the family to get this amount.  We also have a mortgage at 1.34% where I make the minimum payments with the rest saved at a higher interest rate.  When my fixed rate ends in 4 yrs then I'll pay it off.

HID is building it DIY and is therefore slower than we can spend, so higher interest rates is good for us.

We have been somewhat shot in the foot by rising material costs, but it took us many years to get planning to convert our barn so we couldn't start any earlier and DIY was always our plan.

[ProDave]

3 hours ago, Jilly said:

An approach which is more insulated from interest rates is to save loads by living on site in a static, and go slowly, ‘ build as you earn’  in effect. By trying to stay out of debt and avoiding loans if possible, you can take your time researching prices and doing as much as possible yourself.

 Been there, done that, got the tee shirt, I could write a book on it.

[gavztheouch]

I have been getting cheaper quotes recently even the internorm window quote went down since February. Still isn't enough to make building attractive yet, but I reckon you could design a simple house that performs well for a reasonably cost. My house is way to complex for me to build myself and that is what is costing me, wish I had stuck to my guns and built a single story house that is designed to be easier to build.

 

 

[Amateur bob]

hoping to build later this year in central scotland, how are the cost of materials now have they dropped to pre covid levels or are things still sky high?

[Ferdinand]

I think the best hope here is that interest rates will be going back down again soon, but maybe not as far.

[LSB]

I needed some supplies last week, wood, blocks, sand and cement.

Who said prices had reduced, they were a lot more expensive than last time I bought the same stuff, by about 20%

I was really shocked as I thought they had reduced.

 

[Russell griffiths]

You really need to shop around, it is a pain and wastes time. 
every thing I buy over £300 I get 3 prices. 
just last week I needed plasterboard and some osb. 
3 merchants that I have accounts with all 3. 
cheapest £460, next £480, dearest £540. 
on just a few sheets of stuff, that’s a fair difference between the 3. 

[saveasteading]

40 minutes ago, LSB said:

as I thought they had reduced

Inflation was 10%. Now its 'only' 3%. So that's an increase of 13%.

Approximately, I know. 

So any savings suppliers can offer are off that Increased cost.

Maybe a bit cheaper than 6 months ago, but not than a year or 2.

 

In my experience there is much more material cost to be saved in good design and efficient use of materials than in discounts. Do both of course.

 

[Jenki]

7 minutes ago, saveasteading said:

In my experience there is much more material cost to be saved in good design and efficient use of materials than in discounts. Do both of course.

100% this - alternative ways to skin the cat are out there, but need planning.  1 example is 300mm EPS vs 150mm PIR for a slab  = massive saving similar result. 

Same for slab build up,  many a time read on here quoted  "Hardcore and blinding, 100mm Concrete, Insulation, UFH in pumped screed.."   most on here are building towards passive standards so why the need for a screed that is reactive?    "Hardcore and blinding, Insulation, UFH in Concrete slab"  is relatively cheap, although you may end up with some levelling compound, localised grinding  to iron out the imperfections (🙈hard earned experience).

 

 

[saveasteading]

2 hours ago, Jenki said:

300mm EPS vs 150mm PIR for a slab  = massive saving

I thought they were much the same cost.  eps is half the price but half the insulation.

Then there is the possible complication of that extra 150mm inside or outside the building.

I would however split the difference and put 150pir on 150 eps as the insulating benefit is not linear.

[Kelvin]

Building materials are still dear. They have either stopped going up or are going up more slowly. You are more able to play suppliers off each other though as demand appears to have reduced a bit.