In the article You think you can't afford to get a nice home of your own in your own area, we have looked at why those homes that are called self builds, even if not involving any building at all by the new owner, is so much cheaper, saving anything from 25% to 60% on the same home coming from other sources.
And at the same time how often it is not the affordability that presents a problem to the first time buyers, but the income multiple limit imposed by lenders.
The problem often for the first time buyer, whether a single person, friends who wish to get a home together or a couple looking at setting up their first home, is that the salary that they have is not sufficient to qualify for a mortgage now that prices have risen so far in the area that they live. In the other article we have looked at other options to get onto the housing ladder, such as buying in a cheaper area and renting out so as to gain equity over time, and to start on the road to property ownership. We also looked briefly at other forms of shared ownership, where you have at the beginning part ownership of the property.
For many the whole reason that they are looking at buying a house is not just as a financial investment but a desire to get a home, in many cases allowing them to establish for the first time a home to build a relationship within and a place that they can make their own, as well as to be able to move ahead with their lives.
In this article we are turning our attention away from the purely financial reasons for the first time buyer to get a property of their own and looking instead at the cases where it is principally a home that you require, and where you feel that the ideal home would be one that is designed and developed to meet your ideas and will also give you the chance to develop and fully personalize as a home of your own.
As a club we feel that this is a major area where we should try to play a leading and coordinating role, wherever we can. By this we mean actively looking at ways that homes can be developed for a lower budget to open up home ownership to those who are currently restricted by income multipliers.
There are a number of reasons why the number of starter homes built are so far short of the number required, and why where they are, they are still often still too expensive for many people. Part of the reason is often associated with the shortage of land available to build on, and so developers faced with the option of building a low priced house, that will give a small margin, or a larger home that will give a larger margin, choose to build what is more profitable. The amount of land required to build a smaller home is often not that much different than that required to build a larger home, this is because in many cases you have to also allow room within the grounds of the house, not only to be able to park, but to be able to turn a car around.
Councils have in many areas tried to overcome this by saying that in order to get planning that a certain percentage of affordable homes have to be included within the development. However in many cases developers have managed to persuade them to drop these requirements and in many others they have chosen to develop some homes that will qualify as starter homes but are still above the scope of what many can afford, and sold in most cases to those looking for property for 'buy to lets'. Even where the cost of building is lower often nearly as much land costs are involved, so it is difficult for the developer to build budget homes. In addition often the councils will have asked for other expenses to be incurred by the developer as a part of the deal, perhaps funding a new section of road, or local amenities, the cost of which has to be recovered over the number of housing units that they build.
The self build route provides of course a solution for many people, in that a property can be obtained far cheaper than by other routes and therefore some who cannot qualify to buy other property will be able to qualify to buy a self build.
The club can go further in assisting those who want to create budget homes in a number of ways. Acquiring suitable plots at a lower unit cost, is of course the major one.
So why you may ask should the club be more successful at sourcing these than developers. Partly because we see it as major part of our function to help first time buyers, and therefore we are going to give first time buyers, looking to obtain a budget priced property, an equal chance and secondly by actively looking at ways that more plots specifically suitable for this, can be created. Thirdly we are going to look at lower cost means of building your home on the plot.
Lets look at a few examples
This and a number of other ideas should, as you will see, offer us the scope to get you onto a plot at a lower unit cost, but what about cutting the cost of constructing the houses.
We would expect to be able to help you achieve a considerably lower build cost, this will be possible because
We would also expect to be able to project a lower cost in relation to a mortgage application, by identifying some items that can be done subsequent to the building being completed. This is not what might be called absolutely essential items, but more in the realms of fitting out. It may also be that some part of the build can be classed as enhancements to the original deign, and as such are not included within the initial property budget. It may be that you could extend the mortgage later to include this or fund it from an additional loan from another source.
Another organization we are working with the Affordable Homes Project, this is a non profit company limited by guarantee, similar to a charity. This has only recently been set up, specifically with the objective of helping people to obtain affordable homes. It will achieve this by both sharing information on its web site and also joint ventures utilizing land that it has managed to get at a lower cost. The way that this will work is that you will be able to build a home on the land, that is held by you leasehold, on the condition that should you sell your home that you buy out the freehold. The price for this is set at the beginning as the discount in land value that you have had, so that you get all the appreciation on the property value and the organization gets back a little, that it can use towards obtaining more land to continue the operation. It is too early to say exactly how much this will reduce the cost of homes by, but they start out with the objective of having homes at well under half the price they are conventionally in the same area, and we would not be surprised to see them under a third of the price in some areas. There are other schemes available, but these do not normally allow you to have all the increase in property value, so although they can be attractive to start, can end up expensive routes in the longer term, or may even trap you into them, by limiting the sale price or taking all the increase, this is because they are housing projects, not projects to empower you to become a homeowner.
In 2005 we are running a special project to create far more opportunities for first time buyers, as our project of the year, and this will mean that targeting the provision or truly affordable homes will become a major focus of our activities over the year. In each area as we look to set up groups, generally through publicity and when talking to all others interested in supplying the self builder we will be bringing up the subject as to how we can help to make the provision of more truly affordable homes increase. This will also be done in co-operation with the Affordable Homes Project.
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Self Build Homes Club is an international club
and trading title of Self
Build Homes Club llc. Local services
to serve members are commissioned for the club by New
Atlantis International Services Corporation.
All major commissioned companies involved, have New Atlantis trust status.