Mark Brinkley: The UK Self Build Market

I often get asked how many self-builds take place each year in Britain. People assume that, because I have been involved with self-build for 15 years, I have the answer. But the truth is that nobody can do much more than hazard a guess. There are a number of problems in gauging the size of the self-build market. Firstly, there is the problem of definition. We all have a notion of what a self-build project is, with the couple (it is usually a couple) and possibly kids living in a caravan, wrestling the weather, with the project running over time, the budget stretched to the limit, but everything turning out fine in the end.

But for every one of these heroic self-builds there is another where the self-builder has hardly lifted a finger, other than to write out a cheque to the builder. Or a builder who moves into one house on a development. This may not seem like a self-build, but the taxman doesn't distinguish between them. As far as they are concerned, the only difference is between houses built for sale on the open market (speculative builds), and houses built for personal use (self-builds). Spec builds get taxed on profit, self-builds don't. And because you don't have to fill out details of a self-build on your tax return, there are no statistics on how many there are.

But there is one aspect of self-build that gives statistics - VAT. Self-builders are able to reclaim most of the VAT they pay out on materials, as new homebuilding in Britain enjoys a zero-rated VAT regime. Indeed, Customs & Revenue runs a scheme specifically for self-builders. Type DIY into the search field of the Customs & Revenue website (www.hmrc.gov.uk) and all will be revealed.

The VAT people produce useful figures from this exercise which tell us that:

• Between 10,000 and 12,000 people a year use the service
• They reclaim on average £6,500 each
• They try to reclaim even more - around 15% of claims are disallowed!

But this still doesn't tell us the size of the market because, as already discussed, loads of self-builds are managed professionally and don't ever make a VAT reclaim, because the builder doesn't charge VAT, or they reclaim it via their own accounting procedures.

There is another set of statistics to estimate the number of self-builds - the number of planning applications for single houses, habitually around 20,000 per annum. But we just don't know how many are self-builds, so again the figures are vague. And that's the best we can do: most are content to split the difference and say that there are about 15,000 self-builds a year.

Whatever it is, it's a large number. It accounts for around one in 10 new homes in the country as a whole and as many as one in three detached houses, which makes self-build, as a sector, comparable in size to the amount of affordable homes being built, or to the output of the largest of our private housebuilders. If self-build was a single business, it would turnover around £2.5 billion a year - enough to rank it as a FTSE100 company. And that's without accounting for the money being spent on land purchase.

But compared to other countries, our self-build sector doesn't seem so big. In Europe and North America, self-build accounts for a much larger proportion of housing - as much as 50%. It is referred to as custom homebuilding and is usually carried out by a single builder - you don't get involved in anything more than choosing roof tiles, bathroom suites etc. The more hands-on self-build homebuilding does go on elsewhere, but its very much a minority activity.

So the main difference of the British homebuilding market is the absence of this custom homebuilding sector. It's place has been filled by the speculative housebuilders, who between them account for around eight out of 10 new homes. Instead of building for a specific customer, the spec housebuilders look to produce something as neutral as possible, to cause the least offence to the greatest number of people. Its no wonder, then, that their designs are so tame and lifeless.

Further Reading:

• Is now the right time to self-build?
• Building Talk: The Housing Market