Building your own home can prove an exceptionally good financial investment but the costs run to more than bricks and mortar. Legal fees, additional labour costs and wastage of materials are just some of the things that can trip you up during your self build.
Luckily, Homebuilding & Renovating is here to guide you through the financial minefield with self build expert David Snell. This article highlights all the extra costs along with estimated figures to help you plan your self build more thoroughly.
Getting Started: Access, Groundworks and Services
In between paying for all the design and construction work, you will also need to budget for a raft of preliminary costs, often forgotten or ignored, that have to be paid out in order for work to commence. The first of these is for service connections. You might not think that you need them until near the end of the job, and with things like telephone and gas you’d be right. But electricity, although not necessary until the later stages, is always useful to have on site, and water is absolutely essential. So, as soon as you have viable plans, it pays to obtain quotations from the service suppliers.
If you are on a street where all of the services are available, then it’s going to be cheaper, but if they are on the other side of a busy road, where traffic lights will be necessary, then the costs will rise. If the distance from the service in the road to the proposed usage point is greater than 40 metres, then costs will ramp up as there are added requirements for pipe width, and so on.
Secondly, having labour on site means cost implications (if you’re running the project yourself as opposed to using a main contractor). You need secure lock-up facilities and ideally a site office — the best way to get those is to buy a shipping container for between £650 and £1,500, which you’ll be able to sell on afterwards and which may double up as site hut. You will also need toilet facilities, which you can hire in at a cost of around £88 per month.
Estimated Preliminary Costs
|House 20m from road||House 55m from road|
|Create site entrance|
|Digger hire (one day inc driver)||£240||£240|
|Labour (one man-day)||£120||£120|
|Excavate and backfill service trenches and lay pipe and ducting|
|Digger hire (two days)||£240||£480|
|125mm ducting (£29/6m x2)||£232||£580|
|Coil of draw string||£13||£13|
|25mm water pipe (£15/25m)||£15||n/a|
|32mm water pipe (£50.25/75m)||n/a||£128.84|
|Ply for boxing and insulation||£54.19||£54.19|
|MOT Type 1 roadstone||£387.27||£909|
|Secure lock-up||£1,100 (can be resold later)|
|Hire of toilet||£88 per month|
Finance Costs and Redemption Penalties
It is easy to forget that borrowing to fund a self build project has its own costs. Finance costs will vary according to personal circumstances, but most people find they have to pay a lender’s survey/valuation fee on their plot or renovation project of £3–400, plus further fees of £40-50 for each of four or five interim inspections required before the release of mortgage stage payments. Some special offers, such as fixed rates, may also require an arrangement fee of £3-400. If you are using a broker to arrange your mortgage there will also be a fee for their services.
If you are contemplating a mortgage where the stage payments are made in advance, be aware that there will be an arrangement fee and a mortgage guarantee premium starting at £600. Part of this cost, however, is offset as there will be no interim inspection fees.
If you’re having to change lenders in order to obtain a stage payment mortgage, watch out for any redemption penalty charges that might be imposed by your existing lender.
Finally, don’t forget that from the moment you borrow money, interest is due.
Surveyor and Engineer’s Fees
Overgrown plots, uncertain boundaries, sloping sites – all will require a site survey at a cost of £300–£500 before any really meaningful work can be undertaken by your house designer Planning consents can be issued with a requirement that an archeological survey is undertaken before either the granting of detailed consent or commencement of work. These surveys cost around £3,000 and if they turn up something important then it can cause considerable delays to construction and add to development costs whilst it is investigated.
Bad ground can mean that you will need a soil investigation and in turn that can mean that an engineer will have to be involved in foundation design, increasing costs by upwards of £1,000. Certain design features will also necessitate the input of an engineer and calculations, occasioning additional costs of around £200.
Legal and Estate Agent’s Fees, Stamp Duty and Land Registry Charges
Buying the average plot and selling the average home can involve the self builder in legal fees of up to £1,000 for the two transactions depending on just how complicated the title is. In addition, on the purchase of any land or property, Stamp Duty is payable at 1% of the price over £125,000, rising to 3% above £250,000 and 4% above £500,001. There is also a requirement that all land and property transactions are registered with HM Land Registry. There are no fees for property under £125,000. Estate agent’s fees for the sale of a house, assuming sole agency, usually amount to 1.5% of the sale price plus VAT.
Extra Labour Costs Caused by Delivery Delays
Time is money in any building project and delays caused by lateness or non-delivery of materials can incur extra labour costs for waiting time, plus increased finance, rental and hire costs. Most materials are available from builder’s merchants, but if you wish to take advantage of reduced prices for full loads you will probably want to be quoted for direct loads, from manufacturer to site. Bricks and floor beams are usually available within a two week period, whilst blocks have a lead in time of about a week. Trusses and other joinery products, such as staircases and windows, can often have a lead in time of three weeks and at certain holiday times this can be extended. Timber frame manufacturers often have lead in times from order to delivery and erection, of anything from eight to twelve weeks and, unless this is allowed for, it can result in all work on site coming to a grinding – and very expensive – halt.
Planner’s Requirements for Expensive Materials
Many of the timber frame manufacturers base their indication of average completion costs, after erection of the frame, on fairly standard – if not cheap – materials. Urban sites in the less desirable or attractive areas can often be developed using these materials. However, many self builders are building on rural or semi-rural plots where the planners may be very sensitive about which materials are appropriate. Changing from a rendered or Fletton brick external wall finish to a hand made brick can treble the material costs, whilst natural stone could be four times the price. If stone features are required then these can easily add £1,500 to a 140m² house. Changing from an interlocking concrete roof tile to either plain clay roof tiles or natural slates would add around £3,500. These materials are also likely to mean higher labour costs. Conversely, many local authorities frown on the use of PVCu joinery in sensitive planning situations, making a possible saving of around £2,750 if softwood is chosen.
Wastage of Materials
With extensions, renovations and conversions, the natural inclination of the discerning self builder is to use materials that blend into the original. This means that the choice is often to use second hand or re-claimed materials, and these often carry a premium. However, they also have a high wastage factor making it necessary to over order in the first place, as it can be very expensive or impossible to obtain extras in small quantities. Labour costs may also be increased. Bricks might be of uneven shape or consistency, making the job of selection and laying a slower process. Slates and tiles might well need re-drilling or shaping and this too slows down the work, therefore increasing the price.
Certain new materials such as bricks and blocks have to be ordered in full loads, meaning that you have to buy more in the first place and that, on tight sites, there might be additional costs in disposing of the excess.
Warranties and Insurances
It doesn’t make sense to self build without adequate insurance and warranties and to do so, despite the initial saving, can be a false economy. If you are using a builder and you are not intending to supply any materials yourself, including high value items such as kitchens and sanitaryware, then there is an argument for relying on their site insurance. Otherwise it makes sense to have your own self build insurance policy and this can cost between £500 and £1,000 depending on the size of the overall contract. Although there are now several competitors offering structural guarantee insurance or warranties for self builders, this has not resulted in any significant reduction in costs. The average self builder can still expect to pay between £600 and £1,000.
Theft and Vandalism on Your Building Site
The cost of replacing any lost or stolen tools or building materials should be covered by your site insurance policy, as will the repair of vandalised work. Bear in mind, however, that you will have to cover the cost of the excess – the part of any claim which must be paid by the policyholder. The excess varies from insurer to insurer but is typically at least £400. Most small items that are stolen from site – plant or materials – will not be worth claiming for.
Also not covered is any time that is lost in waiting for replacement materials and the loss of momentum on site this could cause. Certain subcontractors might not be able to wait for new materials and may well have to move on to another site. If you can’t get them back later, then it might cost extra to employ other tradesmen to take over the job part way through and complete things. What can’t be quantified is the emotional cost that such an event can produce, so take every precaution to avoid thefts from happening by taking site security seriously.
Additional Work Discovered in Progress
With the exception of work below ground level – where you cannot easily predict what you will find – building a new home should not mean too many nasty surprises. Those renovating, restoring or converting property cannot, however, be so certain. It is very easy to make wrong assumptions and many are left feeling that they have ‘opened up a can of worms’. Whilst it is relatively easy to assess the condition of the basic superstructure and cost out the necessary works, leaking or blocked drains can cause subsidence that may only become apparent when the site is cleared. If underpinning is required then, whilst this is not rocket science, it is nevertheless a difficult job which can cost around £500/m assuming a depth of one metre. Also, if you are using traditional materials, such as lime plasters or renders, then be aware that shortages of skilled practitioners may mean having to pay extra or waiting for long periods.
Connection Fees for Utilities and Services
Privatisation and the splitting of responsibilities between producers and providers have caused immense complications for those seeking a new supply of services. Whilst there are scales of charges laid down for things like a new water supply, a temporary stand pipe and the right to connections to sewers, electricity and gas suppliers now quote each individual situation separately.
In a suburban plot or in a large village with most main services, a quotation for supply of water and the right to connect to a mains sewer can vary in price between £500 and £700 in addition to the cost of any associated work to the public highway. Gas can vary from a few hundred pounds to over £700 and electricity from £500 to £1,200. The cost of a new domestic telephone line is about the only constant with a price of £74.99.
The cost of installing the essential services to a more remote location can be vast and this needs to be researched from the outset.
Extra Building Costs Due to Amended Plans
Additional building work not itemised in the original contract price is known in the trade as an ‘extra.’ Depending on the number of changes or additions to the original plans that are requested, the cost of extras can total £1,000s on top of a ‘fixed’ contract price. Many self builders fail to realise the cost implications of changing their mind – often the additional labour cost is not obvious to a layman – and feel that their contractor or subcontractors are trying to rip them off, leading to disputes, delays and further costs.
The best way to control extras is to make certain that absolutely every detail is finalised and described accurately within the plans and specification, and then to make absolutely no additions or alterations. This means choosing all of your materials, fixtures and finishes in advance of getting in quotes. In reality, this is rarely practical and even if it were, it is unlikely that changes can be avoided altogether – it is often impossible to turn down ideas that will make for a better home – and so it is a good idea to allow for extras within your budget contingency of 10%.
When you agree a contract with your builder, discuss the basis on which extras will be handled. When you ask a builder or subcontractor to do extra work, agree a price for labour and any materials there and then.
Non Recoverable VAT on Building Materials
Most VAT paid out on materials for a new dwelling, including conversions, can be recovered on completion of the project, with certain notable exceptions. These include:
- VAT on professional fees (unless included as part of a design and build contract);
- VAT paid out on the hire of plant, scaffold and machinery;
- VAT on delivery and pallets (returnable or not)
- any VAT wrongly charged on labour and materials supplied by builders or subcontractors that should have been zero-rated.
Details of work eligible for VAT relief are available in HM Customs & Excise VAT Notice 719, ‘Refund of VAT for DIY Homebuilders and Converters’, and VAT Notice 752 ‘Land and Property’.
Those renovating or restoring an existing dwelling will not be able to recover the VAT paid out unless it has been empty for the last ten years – in which case it will be treated as a conversion, or if it has been empty for at least the last three years, in which case the rate will drop to 5% providing the work is handled by a VAT registered builder – there is no DIY VAT refund scheme for renovators equivalent to the one for self build and conversion. Nor is there a DIY VAT scheme for those undertaking ‘approved alterations’ to listed buildings – which are also eligible for VAT relief, but only via a VAT registered contractor or subcontractors.?Details are given in VAT Notice 752 ‘Land and Property’.
Higher Building Regulations Fees and Inspection Charges
In Scotland the fees for the Building Warrant, including the necessary inspection charges, are paid at the time of application. In England and Wales the fees are paid in two separate parts; on application and then when inspections are required. This often leads to a misunderstanding: the self builder, believing that they have paid their architect or designer for the fees, then receives an unexpected bill from the local authority.
Charges for Building Regulations applications and inspections vary from authority to authority. The norm is £140 + VAT on application plus £265 + VAT for inspections for houses of up to 300m² and not more than three storeys. If the house exceeds this size then the fees are assessed on build costs and can rise, subject to the discretion of the Building Inspector, by up to 50%.
Accommodation and Furniture Storage
If you are living in your old property during the construction of your new home, then whilst you might not have additional living costs you may well have to include interest costs on any additional borrowing. If you have decided to sell up and move into rented accommodation then be aware that the monthly rent might be more than your normal mortgage costs.
Most properties are let on a shorthold tenancy agreement for six months, extendable thereafter on a monthly basis, but sometimes the landlords will require a new fixed term agreement.
Those living in mobile homes will be best off but will have to include purchase and setting up costs within their cashflow projections, although much of the purchase cost might well be recovered upon resale at the end of the project. If you are in a mobile home or in furnished rented accommodation, don’t forget to include the costs of storage, which for an average four bedroom house can be around £200 per month.
Unsuspected Ground Conditions and Muckaway
Before buying a plot or a renovation opportunity a soil investigation and survey should always be commissioned in order to assess the type of foundation likely to be necessary. However, any conclusions will be based upon trial holes that are either bored or dug at various points on the land, usually outside or beyond the limits of the proposed house. It is therefore possible that when the actual foundations are dug, what is experienced could be profoundly different from what was expected, necessitating a change in the type of foundation. This can vary from having to go a little bit deeper in order to avoid a soft spot such as an old pond, with a cost of little more than a few hundred pounds, right through to pile and ringbeam foundations involving extra costs of between £7,000 and £10,000.
The cost of removing spoil from foundations can also be high, currently in the region of £150 per load. Few contractors or groundworkers will give a fixed price for this work and if adverse ground conditions requiring extra digging arise, this will add to disposal costs. Muckaway is also a significant proportion of the cost of building a basement.
Highways Contractors, Sewage Connections and Creating Access
The costs of a standard driveway, approximately 5.5m wide and extending back 14m from the carriageway with turning and parking space, surfaced in gravel but with a tarmac section at the abutment to the road, is around £4,000. If you require the whole driveway to be surfaced in either tarmac or block pavers then the costs will rise by around £1,000.
Only Local Authority Approved Contractors are able to carry out works to, on or under the Highway. Whilst some local authorities will allow ordinary contractors (providing you or they have the necessary public liability insurance cover, typically £2,000,000) to carry out works up to and abutting the Highway e.g. the drop kerb for a new access, others insist that works such as this are carried out by approved licensed contractors. This can have the effect of pushing costs up from around £1,500 to something like £4,500. Connections to sewers within the Highway can cost around £3,500 and, on a busy road, where extra precautions have to be taken and traffic lights provided, the costs can escalate dramatically.
Delivery Charges and Non Returnable Pallet
Whilst builder’s merchants normally include delivery within their price, any materials ordered direct from manufacturers or salvage yards will usually incur a delivery charge. Make sure that when you get prices for your budget that the quote includes delivery. If your site is difficult to access, there may be additional delivery charges for staged deliveries on smaller vehicles.
Bulk materials such as bricks, blocks, pavers, multiple bags of cement and plaster etc. are usually delivered on wooden pallets. Most builder’s merchants and direct suppliers charge extra for this at the rate of £10 per pallet and then say that this is refundable if the pallets are returned in good condition. The problems that then arise concern keeping the pallets in good condition – they make excellent firewood – and relying on the companies being available or close by to pick them up when required. Some companies agree a refund of £1 less than the original cost of the pallets whilst others make a straight charge of £5 per pallet, non-returnable.
Most sites have an optimum carrying capacity. Imagine a street of houses, all roughly the same size and all having the same value. Now assume that a site of roughly the same dimensions as all the others comes up and that someone decides that they are going to build a house half as big again as the rest of the houses in the street. Their costs could be up to 50% higher than those they would have experienced had they built a smaller house. Yet in many cases, the value of the completed house might not be substantially greater than its neighbours. The site would have been over developed. On the other hand, if someone builds a property that is not grand enough to come up to the ceiling value that the site can sustain, then the true potential of the site will be lost. The site will have been under developed. In both of these cases the hidden cost of the self build will be marked by a discrepancy between cost and value to the detriment of any equity gain.
Scaffolding and Plant Hire
An average sized four bedroom house will need scaffolding for between twelve and sixteen weeks at a cost for hire and erection of around £125 per week. That is worked out on a rate of £12/m for each lift. If your site is on sloping or waterlogged ground then it might be necessary to employ a foot scaffold (scaffolding and boarding at or around ground level) and that can add around £10/m².
If there are delays on site and the hire period needs to be extended then there might well be a weekly penalty of around 10% of the total hire charges. Bad ground or difficult access might also necessitate the hiring of an all terrain fork lift truck in order to get materials on site and that can cost around £250 per week. Shifting loads of muck on site can also mean that you need to hire a dumper to work alongside the diggers and this can cost around £99 per week.
You may also need to allow for hire of some sort of storage facility on site and portable WC facilities for the builders.
Additional Architect’s Fees
Make sure that you agree fees with your architect in writing and ask for details of any additional costs such as printing out sets of plans or producing colour elevations. Ensure that you allow for all of the drawings and speficication documents necessary to build the house.
If your architect is inspecting or supervising the work and an abortive visit or unsatisfactory work requires that they have to make an additional visit to site then you might well be faced with extra costs of between £50 and £150 for their time, plus expenses.
Sometimes drawings are not very clear and if this is the case, and fresh or explanatory drawings are required, then you might very well have a good argument against extra fees. If however, you have chosen subcontractors who are unfamiliar with some aspects of your design or are unable to comprehend particular features, then your architect or designer will have good cause to charge extra.
Some architects agree to provide a set number of drawings within their agreed fees. However, you may find you need further copies in order to get quotes from a number of different builders or subcontractors and there might be a charge for additional copies.
Your Own Time and Expenses
Perhaps the least obvious cost of all is that of your own time and expenses in visiting plots, the site, suppliers, architects and so on. The additional motoring costs of driving to and from the site every day can be considerable, as can the cost of the inevitable telephone calls, particularly on mobile phones, to builders and suppliers. There is also a notional cost attached to your own time – which could perhaps otherwise be spent doing overtime, freelance work, or a second job. This is especially the case for DIYers putting in countless hours.
Gone over budget?
If all of this advice comes too late for you and you have already discovered these hidden costs then it is time to take evasive action to get your budget and project back on the rails.
- Contact your lender, explain the situation and ask for a further loan advance.
- Talk to your bank about a short term loan explaining that you will remortgage the house when it is completed to repay the loan.
- Try and arrange more credit with suppliers – first ensuring you can increase your mortgage or take out a loan when the house is finished.
- Consider staging the build, leaving some non essential work until funds allow.