More and more people are extending their DIY skills and choosing to self-build a home

It WAS only a matter of time before people in search of a new home in the current moribund housing market would take matters into their own hands and build one themselves.

And evidence suggests that the self-build route is becoming increasingly popular as a way of saving costs and taking more control, in a climate of low sales levels and broken chains.

Greater interest in self-build comes as the government looks into ways of boosting the market. Last month it backed an action plan aimed at tackling the obstacles to more self-build activity, such as availability of land and finance, industry support and the loosening of certain pieces of red tape.

The plan, based on industry proposals, is supported by Scottish housing minister Keith Brown and is being pushed by his Westminster counterpart Grant Shapps, who wants a return to a self-build culture which, until relatively recently, produced an average of 20,000 UK homes a year.

That has dropped to an estimated 15,000, according to the National Self-Build Association, with self-build accounting for less than 10 per cent of total new housing stock in the UK (compared with at least half in Germany and France). But the government believes that by making the process easier it could take self-build numbers up to as much as 50,000 homes a year.

Several factors have kept self-build numbers down, from a shortage of suitable available land, housebuilding firms buying up land options, restricted access to finance and what John Boyle of Rettie refers to as a “lack of entrepreneurial culture”.

Boyle, Rettie’s head of research, said: “You can do it yourself or employ builders to do it for you. It can be done cheaper than buying, you might be able to save between £10,000 and £15,000, but there are difficulties and risks you don’t get if you buy new or second hand.”

However, one in three people would think about having their own home built if the finance was available, according to research by Norwich & Peterborough Building Society, with 12 per cent considering embarking on a self-build project within the next year.

Most are attracted by the idea of building something suiting their own needs, although one in four also believe they can make big savings compared with the cost of buying a ready-made home.

Some housing market insiders have reported a gradual resurgence of interest in self-build in Scotland.

Michael Maloco, partner in solicitors and estate agents Maloco & Associates in Dunfermline, said: “Given the market we have seen an increase these last three years or so of smaller builders being prepared to off load a plot or two for self-build.”

Raymond Connor, chief executive of BuildStore Financial Services, said activity levels have improved markedly. It posted a 24 per cent increase in the number of self-build mortgages secured for its clients in the first half of 2011, compared with the same period last year, with mortgage completions up by a similar amount.

Connor said: “As land prices have come down and the wider housing market has been slow to recover, building your own home is an attractive option for many homeowners, especially given the option to choose your own design and specification, and the fact that most self-builders end up with at least 25 per cent instant equity in their new home upon completion.”

William Frame, head of lettings agency Braemore Estates, believes there has never been a better time for a self-build project.

He said: “The current economic climate, which has affected the property market, has provided the perfect conditions in which to self build. Building costs are a lot more competitive now and you also get it built more quickly because tradespeople and contractors want the work. The service is better and you can also get the material delivered more quickly.”

Many people going down the self-build route are selling their existing home and renting while they build a new home. It tends to appeal to what Frame refers to as “active retireds” who have money to use and to people returning to live in Scotland after years away.

He said: “Good sites are hard to find and planning permission isn’t getting any easier. But if you’ve got passion a lot more people are able to help now; housebuilders, quantity surveyors and architects are more geared up for it than they used to be.”

Frame estimates the cost of building your own house at being as much as a fifth cheaper than buying, when the final cost is compared with the market value.

“You should be able to create a 10 to 20 per cent margin on completion of the house if you do it right. A well-designed house will always sell for a premium.”

But what about the actual financing? The first step is to ask your own bank if it will lend to you. Most banks and building societies have products they can offer and will still lend against an existing house or other assets.

Frame said: “Your bank should be creative to find the finance you need. It is available – all mainstream lenders and some specialists have products available.”

Not all lenders are as keyed up for it as they used to be, however, with mortgage finance among the trickiest hurdles to surmount in self-build projects.

The criteria for self-build loans has tightened since the credit crisis, as it has on all mortgages. Fewer lenders are offering self-build mortgages and the deposits required tend to be higher, with the vast majority of lenders needing at least a 20 per cent down-payment.

Connor at Buildstore said the firm works with a panel of lenders to offer exclusive mortgage products to customers. He added: “Lenders, particularly building societies, are returning to the self-build market, and with the backing of the UK and Scottish governments we expect that we’ll see further growth in the number of self-build homes.”

But in the current housing market it may be easier for some to secure mortgage finance, as lower house prices mean lower deposits, although the lender will still need to be satisfied about other elements of your plan.

Maloco strongly suggests getting independent financial advice when it comes to arranging finance for a self-build deal.

He said: “The rates tend to be a little more expensive than the normal new build or second hand purchase and the draw down is in tranches. The highest loan-to-value (LTV) at present is 90 per cent but the majority are 75 per cent max.”

While there are about 1,600 conventional mortgages available for those borrowing up to 50 per cent LTV, there are just 161 aimed at self-builders, said Maloco.

There are also conveyancing costs to think about, depending on where you build.

“A serviced plot lying off a main road will not require a great deal of additional work, whereas something being built off a farm track with a septic tank in the farmer’s field requires a great deal of additional work to ensure servitude rights of access exist,” he added.