House Price Crash: What Would it Mean for Self-builders?

Is there going to be a downturn in the market? Doomsayers are appearing regularly on the television, wringing their hands and telling us it’s all going to end in the nightmare of a 30% drop in house prices. It could happen. It’s happened before. But is it likely now? I’ve spoken to various people. Michael Holmes, Editor-in- Chief of Homebuilding & Renovating, doesn’t believe that a crash is imminent and points out that, unlike the late 1980s, we don’t have high inflation, we don’t have high interest rates by historical comparison and we don’t have high unemployment. Raymond Connor, COE of BuildStore, can’t see it either. He’s seen a slight downturn in mortgage applications but is convinced that that represents a weeding out of the spurious rather than a decrease in the number of viable proposals.

I think that the froth is going to come off the market. There are a number of overpriced properties out there that are going to take a hit and the inevitable reduction of their prices will affect the headline figures. The inflation of house prices will also stop for a while.

But it won’t stop for long whilst there is the constant under-supply within the market. The country managed 170,000 new dwelling units last year. To keep up with natural demand and immigration, that needs to practically double. It won’t, and in any case, most are ‘rack ’em and stack ’em’s’, which don’t fulfil the need for family homes.

On the television news the other day the presenters were, as we’re going to have to get used to, talking the market down, and they illustrated their point by talking to a lady who’d first of all reduced the price of her home by £5,000 and then by a further £20,000. They went into the home and the kitchen looked as if a bomb had hit it. The refrigerator was stuck in the middle of the room with stickers all over it. There were child’s paintings pinned up everywhere. Practically every rule about what to do when selling a home had been broken. A few months ago, buyers would have looked through all that. Now, with the upper hand, they’re never going to do so. If you’ve got a house to sell, make it the blank canvas that somebody else can make their home. Price it sensibly. Avoid DIY botch-ups. Keep it clean and keep it tidy. It’s has to be better than all the others. And that goes for self-builds as well. Build with the market in mind. Remember the maxim, ‘least in most out’, and temper that with the need for kerb appeal and ‘wow’ factor, neither of which necessarily mean spending huge amounts of money, and both of which rely more on good design and careful choices.

What does all this uncertainty do for the self-builder? I first self-built in 1970. I’ve been actively involved in the self-build industry since 1975. I’ve seen it go up and down and the lesson I’ve learnt is that self-builders prosper in adversity. When the market is booming, small builders and developers swallow up all the available land, often to just sit on it. When we have an uncertain market and they get jittery, they stop buying and self-builders get a look in. If the doomsayers make them even more nervous or they are in fact right and there is a real downturn, then they’ll start to offload plots simply to maintain cash-flow.

The self-builder with equity in their home, albeit slightly reduced, who’s prepared to either take a small hit on the price they get or who is perhaps prepared to remortgage and let out the old house, will have a distinct advantage over the small builder with all their overheads. If they are genuinely building for their own occupation, they can afford the mortgage and they’re prepared to sit tight and ride out the storm, this is the time to be brave and give it a go.

Read more from David Snell in his blog...

Have your say on the current state of the housing market in the Homebuilding Discussion Forum...

Further reading:

• Self-build: Is Now the Right Time?
• All About Self-build
• The 12 Steps of Self-build