2 April 2015
A new report reveals that custom build could be the key to getting UK housebuilding back on track, as radical change is required to deliver the number of new homes needed to meet population demand.
{TEASER}
The document – published today by the Mortgage Advice Bureau (MAB) – concludes that custom build homes are cheaper to construct, allow for greater consumer involvement, present less risk to mortgage lenders and could introduce a large number of new plots into the new homes market very quickly. However, for custom build to fulfil its potential, it calls on local authorities to make better use of Section 106 planning agreements to ensure custom and self build is given favourable planning permission.
Exclusive analysis for the MAB shows custom build houses are 15% cheaper to construct on average as builders do not have the additional marketing costs – used by speculative builders to shift stock – and their overheads are greatly reduced. Builders also need far less working capital as they no longer hold a land bank and are paid in staged payments as they build the property. Reducing builder costs and margins provides instant equity to the homeowner. This in turn substantially reduces risks for lenders, which should increase their willingness to lend.
The paper shows the current planning system is geared towards speculative new builds: larger builders have the resources to spend heavily on land and battle the planning system to secure planning permissions.
To level the playing field, it calls on the government and industry to educate local authorities to make better use of Section 106 planning agreements and compel them to provide favourable planning consent for custom build to boost new housing stock. For example, overall planning for large schemes could depend on elements of custom build being present throughout the site. In some cases, whole sites could be given permission exclusively for custom/self build.
This, the report indicates, should be seen by developers as an opportunity rather than an obligation. For builders, it speeds up the planning process and allows for the construction of homes that are associated with lower costs and fewer risks than the speculative building model. It also allows for SME builders to play a greater role alongside larger developers to increase the UK housing output.
Andy Frankish, MAB New Homes Director, said: “The custom build market’s potential is huge. The myth that it is only for high-income families needs to be put to rest. The low risk associated with custom build makes it attractive to mortgage lenders, so it is critical that more lenders show their support for this type of housing.”
“Custom build should be seen as an integral part of a solution to the housing crisis. Working alongside traditional build, custom build gives customers more choice, reduces their costs and improves consumer equity. This helps to lower lender risk and gives land owners more options when disposing of land, introducing a high number of new plots to the market in a short space of time.”
