The UK wide changes to pension legislation and the Scottish government reforms of stamp duty, which was replaced last month with Land and Building Transaction Tax, are both likely to have an effect.
Self build expert, Michael Holmes, spokesman for The Scottish Homebuilding & Renovating Show says: “Now that people over 55 can access a lump sum from their pension pot we expect to see an increase in interest in self building among this demographic.”
He points out that as well as providing an individually designed home, a self build is a often a good investment with excellent prospects for making the your money grow. Finished homes are worth on average 15-25% more when complete than the build cost.
The Scottish Government’s replacement for Stamp Duty, also brought in at the beginning of April will give the sector a further boost. LBTT is only payable on the land purchase, not the build cost or end value. So Holmes says: “Those looking to make a wise investment with their pension funds could do far worse than to invest in bricks and mortar. Buying land and building a home in Scotland for under £250,000 is perfectly do-able and would fulfill many lifelong dreams.”
The changes to stamp duty will benefit any self builder paying less than £324,000 for land – which in reality will be most self builders in Scotland, where plots are available at a comparatively low cost.
A typical self built project in Scotland has a £225,000 budget with a £300,000 end value meaning the LBTT payable would be zero - as the typical plot costing £110,000 is below the threshold for commercial LBTT. In comparison, to buy the finished home for full market value of £300,000 would cost an additional £4600 in LBTT.
The saving grows on higher value projects. If you managed to build a house valued at £600,000 with a £450,000 project budget, the LBTT would be £1,500 (commercial LBTT payable on the £200,000 plot). In comparison, to buy a £600,000 house on the open market would incur an extra payment of £33,350 in LBTT.
Calum Kerr, Associate Director with SPF, who is a specialist in self build funding, says increased access to pension funds may well help some self builders in Scotland, but more needs to be done to give them access to funding. He believes that the government needs to relax legislation to ease lending before self build can recover to pre-dip activity. “But having a cash lump sum from a pension might help older downsizers and certainly I have many clients aged 60 to 65 in that position, wanting to downsize to a smaller, newbuild property.”
Michael Holmes says that the over 55 age group also coincides with another stage in life where people may be freed from the need to commute, their children have left home and a self build project can become a reality. “The types of properties they are building are much more attuned to their lifestyles than buying from a builder. They can design greener homes with more open plan space, fewer bedrooms but a higher spec with en suites, dressing rooms and studies.”
The Scottish Homebuilding & Renovating Show is at the SECC this weekend with thousands of products and services, experts providing free guidance and free seminars and masterclasses.The show is open Saturday 10am - 5pm; Sunday 10am - 4.30pm. For more information call 0844 8586754 or visit www.homebuildingshow.co.uk/glasgow