Self Build Acts as Silver Lining on Black Financial Clouds

by Peter Hall

When headlines of financial doom thunder through the pages of our daily newspapers like the Four Horsemen of the Apocalypse, it is difficult not to be depressed and more than a little shell shocked to boot.

When was it that a million pounds became such a trifling sum and losses were recorded in billions? Who decided to abort the housing market’s often predicted soft landing and instead plump for the nose dive we are currently enduring?

In the melee that now surrounds us, it is difficult to take a step back and really appraise our own situation and options, without getting sucked back into the fray. However for the sake of our own sanity, as much as anything else, taking a moment to do this will help us highlight and indeed remember the good things that have come out of the financial turmoil we are in.

Changes to Stamp Duty

For years Stamp Duty had failed miserably to keep up with house price inflation and many campaigners had seen it is a further barrier to first time buyers trying to get into the market. Others simply saw it as an unfair revenue generator for the Treasury.

Essentially any self-build project is completed in two parts, with individuals buying a plot of land before going on to build the property they want.

Stamp Duty is only payable on the value of the plot of land and not on the value of the completed property. As such, anyone buying a piece of land for less than £125,000 will not be liable to pay the tax. In effect this covers the vast majority of single plots and only those at the very top of the market will trigger the interest of the taxman.

Building Costs

But what about the building costs and the final value of the house under construction? It would not be unusual for someone to buy a plot of land for £100,000, spend £150,000 building a four bedroom house and for its completed value to be significantly more than the £250,000 outlay. Indeed a value of £315,000 would not be untypical in such a situation. Had the same person decided to buy a property worth £315,000 on the open market, they would have had to find an extra £9,375 just for the Stamp Duty.

It is also worth pointing out that self-build mortgages are still readily available. Lenders will offer up to 85% of the land purchase and building costs and because the value of the property tends to jump on completion, the overall loan to value will end up being significantly less, giving comfort to both lenders and borrowers alike.

Certainly Mary Riley, a consulting director at Self Builder, a specialist provider of finance, advice and information in the sector, believes there has never been a better time to get into the market.

She says: “Mortgages are readily available and because self-builders tend to see an immediate step up of around 25% in the value of their completed property, this provides confidence and security for everyone in these uncertain times.”

Clearly the recessionary winds that are buffeting the UK are not to be made light of and during 2009 the problems in the financial markets will continue to spill out and into the daily lives of each and every one of us.

However it is important that where opportunities exist, we look to make the most of them and where we can make the tempestuous environment work to our benefit, then we actively seek to do so.

The tax breaks on offer in the self-build market provide significant savings for those completing their own project. When taken in conjunction with the way land values have fallen, leaving many plots under valued, self-building is a very alluring prospect at the moment.

Those that can see through the gloom and take advantage of the breaks on offer are likely to reap significant benefits in the future. After all, it is an ill wind that blows no good.

Peter Hall is Marketing Manager at Scotframe Timber Engineering.

For further information, contact Peter at:

Scotframe Timber Engineering Ltd
Inverurie Business Park
Souterford Avenue
Inveurie
AB51 0ZJ

Tel:01467 626843

Email: peter.hall@scotframe.co.uk