Buying land to build a house
Discussion
desolate said:
It's not desperate if you are prepared to do without a large part of the developers profit.
Some people just want a house that is "theirs"
Well, that's their decision, of course, but it effectively means that they are paying above the market rate to do so. And if they're more astute, they need not pay that penalty.Some people just want a house that is "theirs"
But it's a valid point: one of the questions that the OP needs to reflect on long and hard is why he wants to self-build.
It's not the easy option, and can end up costing you a lot more.
desolate said:
It's not desperate if you are prepared to do without a large part of the developers profit.
Some people just want a house that is "theirs"
I agree with this. You only have to read any of the property threads on here to see the constant dithering and obsession over values as people's lives continue to tick by, unhappy with their circumstances. It really is a weird obsession in this country.Some people just want a house that is "theirs"
Profit on a self build is a bonus. If it's your raison d'etre, then you're a developer. As above, there's no reason why you shouldn't be able to make some profit if you're clever about it (and you should be clever about it), but then I suppose I could make a profit on a car if I was clever about it and never actually enjoyed or drove the thing. What's wrong with 'losing' (some might say spending or even investing...) £200k or whatever to build and live in the house of your family's dreams for the rest of your life? Perspective.
ben5575 said:
I agree with this. You only have to read any of the property threads on here to see the constant dithering and obsession over values as people's lives continue to tick by, unhappy with their circumstances. It really is a weird obsession in this country.
Profit on a self build is a bonus. If it's your raison d'etre, then you're a developer. As above, there's no reason why you shouldn't be able to make some profit if you're clever about it (and you should be clever about it), but then I suppose I could make a profit on a car if I was clever about it and never actually enjoyed or drove the thing. What's wrong with 'losing' (some might say spending or even investing...) £200k or whatever to build and live in the house of your family's dreams for the rest of your life? Perspective.
Whilst I don't necessarily disagree with the sentiments behind this, it's the reason (in conjunction with very limited supply of suitable 'Planning friendly' sites) that plots for self builds are so expensive.Profit on a self build is a bonus. If it's your raison d'etre, then you're a developer. As above, there's no reason why you shouldn't be able to make some profit if you're clever about it (and you should be clever about it), but then I suppose I could make a profit on a car if I was clever about it and never actually enjoyed or drove the thing. What's wrong with 'losing' (some might say spending or even investing...) £200k or whatever to build and live in the house of your family's dreams for the rest of your life? Perspective.
The value of development land is normally limited by residual valuation (ie. you take predicted GDV, subtract development costs and a sensible - circa 25% - profit margin for the developer, and what's left over is the land value).
Without any sort of commercial restraint, the values of individual plots will (and have) inflated to ridiculous levels driven by a purely supply-and-demand value.
It means that fewer people will have the opportunity to self-build, simply because they can't afford it, which surely has to be a bad thing?
Edited by Equus on Wednesday 17th October 10:08
I agree entirely, but sadly the system as it is in this country just isn't set up to promote self build. By system, I mean all of the component parts as you know.
On the other side of the fence, we actually did a scheme of 28 self build units back in the late '90's, providing serviced plots to people who wanted to build their own houses. It was a nightmare. Mostly because you're dealing with lay people, but also because (BITD) you had to navigate a planning system that wanted to know which house type went on which plot.
It was relatively experimental for its time and not something we've repeated since as from a business point of view it's just a lot simpler to buy a site, build and sell houses than it is dealing with whims of punters and their socket locations.
That said, it is absurd that in this day and age we are forced to buy houses like we did 20/30/40 years ago. The whole sector is dysfunctional with volume builders controlling the market, smaller developers tending to be builders incapable of innovation and after a quick buck, 'Housing Associations' run by people who are housing officers and not house builders, structural warranties (NHBC and the like) who are in the back pocket of the volume boys and insist on standard construction details stifling innovation, banks that won't lend to self builders or indeed smaller developers, timid agents who won't stick their PI on the line, planning officers who are stuck in the 1980s, Planning Committees made up of shopkeepers, nimbyism, greedy landowners....
Ha, I could go on but I think that's enough ranting for today
On the other side of the fence, we actually did a scheme of 28 self build units back in the late '90's, providing serviced plots to people who wanted to build their own houses. It was a nightmare. Mostly because you're dealing with lay people, but also because (BITD) you had to navigate a planning system that wanted to know which house type went on which plot.
It was relatively experimental for its time and not something we've repeated since as from a business point of view it's just a lot simpler to buy a site, build and sell houses than it is dealing with whims of punters and their socket locations.
That said, it is absurd that in this day and age we are forced to buy houses like we did 20/30/40 years ago. The whole sector is dysfunctional with volume builders controlling the market, smaller developers tending to be builders incapable of innovation and after a quick buck, 'Housing Associations' run by people who are housing officers and not house builders, structural warranties (NHBC and the like) who are in the back pocket of the volume boys and insist on standard construction details stifling innovation, banks that won't lend to self builders or indeed smaller developers, timid agents who won't stick their PI on the line, planning officers who are stuck in the 1980s, Planning Committees made up of shopkeepers, nimbyism, greedy landowners....
Ha, I could go on but I think that's enough ranting for today
ben5575 said:
I agree entirely, but sadly the system as it is in this country just isn't set up to promote self build. By system, I mean all of the component parts as you know........
Ha, I could go on but I think that's enough ranting for today
Ahh no, keep going! We build far too many crap houses in this country, bearly better insulated or draft proofed than 30 years ago, and smaller than almost every other developed nation.Ha, I could go on but I think that's enough ranting for today
Heyho, fortunately most seem blind to it leaving a good range of older houses available at very reasonable prices!
Daniel
ben5575 said:
... we actually did a scheme of 28 self build units back in the late '90's, providing serviced plots to people who wanted to build their own houses. It was a nightmare....
Yes, I've been involved in 'serviced plot' schemes. It's an exercise in cat herding.The Planning system has potentially eased a little, with the introduction of PiP, but on the proposals I worked on Planning was the least of our worries - as you say, it's that fact that you're dealing with lay people, and trying to bully them into getting all their ducks in a row some time in the next century.
As much as you might criticise volume housebuilders, and as much as I love working with self-builders (they form a significant part of my practise), they really are comically inefficient and will never make any meaningful contribution to solving the housing shortage for that reason.
dhutch said:
We build far too many crap houses in this country, bearly better insulated or draft proofed than 30 years ago
I was building houses 30 years ago, and I'm still building them today. I know the insulation we were using then and now, and I know the airtightness levels we are achieving, because I've tested them. I can tell you that that statement is so absurd that, once again, it's comical.I would love to build my own house but I am put off by the friends I know that have done it, they have all underestimated the costs and have started with grandious ideas & each one has rooms completely unfinished years later, probably better to buy from a decent developer & live with his profit.
Equus, could I pick your brain for a minute? My parents own a property possibly not a million miles away from you ( marshland st James - near Wisbech ) of which includes a fair sized paddock to the rear. They have been thinking about selling this land for development but seem to be struggling to get anywhere, with people telling them it’s difficult to get planning but whenever I visit there always plenty of building work going on. I believe they have a few potential issues possibly including access to the site but I know very little of the process. It may well be they just don’t want to pay the fee req to submit planning but they are not getting any younger and I feel if they don’t get on to it sooner rather than later they never will. Where is best to start for someone new to this?
A whole thread on buying land, and i haven't commented yet, I must be busy.
I know the thread has drifted more towards the build but back to land finding:
1. Find it yourself, don't rely on agents
2. Planning registers, google maps and land registry are your main tools
3. Work out where you want to be, get in the car go there, get out of the car wear out shoe leather, knock on doors
4. Be prepared, its never as simple as it looks
5. First time doing this, 100th time doing this - you WILL get the costs wrong have a contingency
6. Always use an option or a contract conditional on planning
7. Always make sure you can get drainage and services to the site and you know how much it will cost
8. Try and avoid the need for foul water pumping and always avoid storm water pumping
9. For planning USE A PLANNING CONSULTANT, I cant say that loudly enough, don't use an architect, don't use a CAD technician, don't use your local flower seller USE A PLANNING CONSULTANT.
10. Be prepared to spend several tens of £k's to get a site to planning, it may cost less but it may not.
11. Do market research, what will the final property be worth, try not to spend more than that!
12. Everyone is development and especially land owners are motivated by greed - remember this in all negotiations
Small fact - Frogmore Estates are one of the UK's largest developers/land owners, they started when the CEO rode to work on the top deck on a bus and realised he could see small plots of land with garages on etc behind rows of houses. he knocked on door until he found the owner, he entered conditional contracts. He is now quite wealthy.
I know the thread has drifted more towards the build but back to land finding:
1. Find it yourself, don't rely on agents
2. Planning registers, google maps and land registry are your main tools
3. Work out where you want to be, get in the car go there, get out of the car wear out shoe leather, knock on doors
4. Be prepared, its never as simple as it looks
5. First time doing this, 100th time doing this - you WILL get the costs wrong have a contingency
6. Always use an option or a contract conditional on planning
7. Always make sure you can get drainage and services to the site and you know how much it will cost
8. Try and avoid the need for foul water pumping and always avoid storm water pumping
9. For planning USE A PLANNING CONSULTANT, I cant say that loudly enough, don't use an architect, don't use a CAD technician, don't use your local flower seller USE A PLANNING CONSULTANT.
10. Be prepared to spend several tens of £k's to get a site to planning, it may cost less but it may not.
11. Do market research, what will the final property be worth, try not to spend more than that!
12. Everyone is development and especially land owners are motivated by greed - remember this in all negotiations
Small fact - Frogmore Estates are one of the UK's largest developers/land owners, they started when the CEO rode to work on the top deck on a bus and realised he could see small plots of land with garages on etc behind rows of houses. he knocked on door until he found the owner, he entered conditional contracts. He is now quite wealthy.
corradokid said:
Equus, could I pick your brain for a minute?...
The Planning system is complicated, but the main things you need to recognise are that as a general rule:1) Unless it's an 'allocated' site (ie. land that has been through a process of assessment where the Planning Authority has chosen it as an expansion to a settlement, in order to meet their target for housing numbers), land outside the recognised boundary of a settlement is regarded as 'open countryside' and with a few exceptions it will be very difficult to obtain Planning Permission to develop it.
2) Even if it's in a settlement, the settlement itself must be considered 'sustainable' before the LPA will support development. In Planning terms, that means it must have enough local facilities (shops, schools, healthcare, employment) for people to be able to live there without too much use of private transport (yes... I know. I don't agree with it, either, but them's the rules).
3) The major exception (there are many minor 'ifs' and 'buts') is if the Local Authority can't demonstrate a '5 year land supply'... basically showing a plan for the next 5 years of where and how they will deliver the number of new houses they have been assessed to require. If they haven't got an up-to-date plan for this, it's pretty much 'open season' on sites that would otherwise not be allowed by their housing policies (other Planning Policies remain intact). I can tell you that until recently, the neighbouring authority of Fenland District Council didn't have a 5 year land supply, and lots of development was approved because of this. A lot of the building work you are seeing in the locality may be a result of this. They do now have a 5 year land supply in place (you can read it here, if you really want to), so that gate has now been closed (but in any case, I'm assuming that your site falls within KL&WN District Council). If your site is viable in other respects, it may be possible to put it forward for assessment for the next round of land allocations, but at present KL&WN can demonstrate nearly 6 years' worth of housing land supply, so aren't exposed in that regard.
If you PM me the location and extent of the site, I may be able to tell you straight out whether you're wasting your time, or whether it has some potential. If the latter, your first step would be to obtain a Planning Viability Assessment, which will look more thoroughly at the site constraints, Local and National Planning Policy, and give more detailed advice on viability and how to proceed. This costs a £few hundred.
Edited to add: in respect of point 10 on blueg33's post, above, that can certainly apply to larger sites (six figure sums to get a site through Planning are far from unknown), but at the self-build end of the market we would usually steer you clear of any site requiring that amount of speculative investment at the Planning stage, for obvious reasons. Everything else he's said, as usual, is spot on.
The only point I would disagree with is this:
6. Always use an option or a contract conditional on planning
Sometimes, you just need to take an educated punt. On a site I am involved with at the moment, which has incrementally grown, obtaining consent along the way, buying several houses to build the site, a conditional contract or option would not have been entertained by any of the sellers and even if it were, they would have wanted a substantial uplift in price, without taking any risk.
That's not to say they aren't used in an awful lot of cases, but they won't always be suitable.
6. Always use an option or a contract conditional on planning
Sometimes, you just need to take an educated punt. On a site I am involved with at the moment, which has incrementally grown, obtaining consent along the way, buying several houses to build the site, a conditional contract or option would not have been entertained by any of the sellers and even if it were, they would have wanted a substantial uplift in price, without taking any risk.
That's not to say they aren't used in an awful lot of cases, but they won't always be suitable.
classicaholic said:
I would love to build my own house but I am put off by the friends I know that have done it, they have all underestimated the costs and have started with grandious ideas & each one has rooms completely unfinished years later, probably better to buy from a decent developer & live with his profit.
I did my self-build because it was something I’d wanted to do for at least 15 years. I really think that many self-builders are driven that way. Maybe it’s just the way we’re built (no pun intended) but without that drive I can see why many projects stall and the people fail to enjoy the process.My build was over budget but I also made a good profit because I didn’t over develop the plot. I see many self-builders trying to squeeze the absolute maximum square footage they can out of a plot to the detriment of the finished product (house plus garden).
Muncher said:
The only point I would disagree with is this:
6. Always use an option or a contract conditional on planning
Sometimes, you just need to take an educated punt. On a site I am involved with at the moment, which has incrementally grown, obtaining consent along the way, buying several houses to build the site, a conditional contract or option would not have been entertained by any of the sellers and even if it were, they would have wanted a substantial uplift in price, without taking any risk.
That's not to say they aren't used in an awful lot of cases, but they won't always be suitable.
But we are talking about a bloke wanting to do his first plot, so he wont be taking an educated punt. What he is best doing is securing an interest in the land and then sorting out the technical stuff. If he hasn't done it before it will take him a while, but he has control of the land.6. Always use an option or a contract conditional on planning
Sometimes, you just need to take an educated punt. On a site I am involved with at the moment, which has incrementally grown, obtaining consent along the way, buying several houses to build the site, a conditional contract or option would not have been entertained by any of the sellers and even if it were, they would have wanted a substantial uplift in price, without taking any risk.
That's not to say they aren't used in an awful lot of cases, but they won't always be suitable.
Occasionally I will buy unconditionally, but its a great way to sleepless nights. I wouldn't advise a novice to do it unless money isn't a factor.
One of my predecessors at my company (former CEO who thought he knew how to buy land) bought a site for 170 houses unconditionally, 10 years on, its fallen to me to sort it out, the business has spent £2.5m on it in WIP. We have to relocate a leisure use that's on the site, the relocation will cost £3m more than the site is worth with the use gone, without the use gone its undevelopable.
Because the contract was not conditional, we will have to take on the chin:
diversion of ductile iron rising main
diversions of 800m of foul and storm sewers
Removal of mobile hydrocarbon contamination
Acqusition of 3rd party land to form highways acceptable access
Provision of 10% more social housing than was assumed
It what we technically call a f
kupAt least with a conditional contract I would have had a chance of renegotiating.
Having said all that, I think I have found a way out that shows us £1m profit. But I would rather not have the headache.
blueg33 said:
Muncher said:
The only point I would disagree with is this:
6. Always use an option or a contract conditional on planning
Sometimes, you just need to take an educated punt. On a site I am involved with at the moment, which has incrementally grown, obtaining consent along the way, buying several houses to build the site, a conditional contract or option would not have been entertained by any of the sellers and even if it were, they would have wanted a substantial uplift in price, without taking any risk.
That's not to say they aren't used in an awful lot of cases, but they won't always be suitable.
But we are talking about a bloke wanting to do his first plot, so he wont be taking an educated punt. What he is best doing is securing an interest in the land and then sorting out the technical stuff. If he hasn't done it before it will take him a while, but he has control of the land.6. Always use an option or a contract conditional on planning
Sometimes, you just need to take an educated punt. On a site I am involved with at the moment, which has incrementally grown, obtaining consent along the way, buying several houses to build the site, a conditional contract or option would not have been entertained by any of the sellers and even if it were, they would have wanted a substantial uplift in price, without taking any risk.
That's not to say they aren't used in an awful lot of cases, but they won't always be suitable.
Occasionally I will buy unconditionally, but its a great way to sleepless nights. I wouldn't advise a novice to do it unless money isn't a factor.
Land bought at agricultural value, for example, still has that agricultural value (or at B1 value for a workshop, or as a house with a large garden, or whatever) even if you fail to obtain PP on it. It is not rendered worthless.
If you can afford to do so, therefore, the only real bargains are to be had where you most definitely don't enter into an option agreement or conditional contract. In fact, you shouldn't mention your true intentions to the vendor at all.
Certainly you may end up paying legal fees, design/application fees and interest on any bridging finance, but at the scale of development at the self-builder end of the spectrum, these can be trivial compared to paying the usual over-inflated prices for a self-build plot of where the development potential is known to the vendor.
blueg33 said:
But we are talking about a bloke wanting to do his first plot, so he wont be taking an educated punt. What he is best doing is securing an interest in the land and then sorting out the technical stuff. If he hasn't done it before it will take him a while, but he has control of the land.
True, I'm not suggesting buying land that has no other use, more buying a house that has enough land to carve off a plot, either living in it or put a tenant in there while you pursue planning and if it doesn't work out the downside should be relatively limited, provided you didn't pay a premium for it. Equus said:
Of course, any sort of option agreement or conditional contract makes your intentions clear to the vendor, thus triggering Rule 1, and conflicting with blueg33's own point 12.
Land bought at agricultural value, for example, still has that agricultural value (or at B1 value for a workshop, or as a house with a large garden, or whatever) even if you fail to obtain PP on it. It is not rendered worthless.
If you can afford to do so, therefore, the only real bargains are to be had where you most definitely don't enter into an option agreement or conditional contract. In fact, you shouldn't mention your true intentions to the vendor at all.
Certainly you may end up paying legal fees, design/application fees and interest on any bridging finance, but at the scale of development at the self-builder end of the spectrum, these can be trivial compared to paying the usual over-inflated prices for a self-build plot of where the development potential is known to the vendor.
The vendor that doesn't twig that the land has development potential is a rare animal indeed. The main point is to secure the site before it gets to the marketLand bought at agricultural value, for example, still has that agricultural value (or at B1 value for a workshop, or as a house with a large garden, or whatever) even if you fail to obtain PP on it. It is not rendered worthless.
If you can afford to do so, therefore, the only real bargains are to be had where you most definitely don't enter into an option agreement or conditional contract. In fact, you shouldn't mention your true intentions to the vendor at all.
Certainly you may end up paying legal fees, design/application fees and interest on any bridging finance, but at the scale of development at the self-builder end of the spectrum, these can be trivial compared to paying the usual over-inflated prices for a self-build plot of where the development potential is known to the vendor.
Gassing Station | Homes, Gardens and DIY | Top of Page | What's New | My Stuff