19 Dec 2017

The changing face of self-build, and custom build’s great opportunity

The changing face of self-build, and custom build’s great opportunity

At last month’s Right To Build Summit, NaCSBA shared fascinating insight and information about the custom and self-build sector, check out my in-depth coverage of the speakers, here.

As part of the afternoon, housing market analyst and pundit Brian Green took us through some of the findings of his Self and Custom Build Market Report 2017. As reported in the feature, his main message was that the custom build and self-build sector must normalise if it is to grow.

The data demonstrated that the current typical self-builders are a breed apart, typified by wealthy, older couples rather than the average family.

What’s more, the homes these self-builders create tend to be larger, of better quality and are valued far higher than similar-size spec built homes, and are also built on more expensive plots. This group also relies on equity to build, either in savings or housing equity.

But this premium group of self-builders is getting older, and their housing/income wealth is locked into this generation, with no guarantee that the wealth will filter down to their children.

So as it stands, wealth underpins the self-build market. Quite simply, this lucrative self-build market will, with time, run out of buyers with enough financial clout to build to the same level as they’ve built to in the last two decades.

This is a warning bell to the industry that should be heeded, especially in the current culture of uncertainty that’s dominating the country at the moment, from Brexit to housing supply.

The custom build sector is constantly debating affordability, and it represents the biggest challenge for the future. But it is one that custom and self-build must take up.

The current housing crisis has two key components, one is the fact that we’ve built so few homes, and resisted development locally, resulting in a simple supply issue.

But the other significant feature is that, as a country, we’ve treated housing speculatively to build housing wealth for home owners. But ultimately, all this does is leave the younger generations cut off from the very market that homeowners have enjoyed the benefits of, as their homes increase in value.

Future house buyers

The situation is untenable, as Government knows. Younger generations are saddled with exorbitant education fees, over £50,000 for your average university degree, with UK fees now believed to be the most expensive in the world.

On top of this, this same generation is faced with saving for a massive deposit to get them on the housing ladder, with the Halifax First-Time Buyer Review putting this figure at £33,000 on average, with £106,000 in London.

So the younger people coming through are significantly less wealthy than their predecessors, a fact further impacted by a decade of poor economic performance. Even the number of First Time Buyers is yet to catch up with the pre-recession figures (190,900 in 2006 and 162,700 in 2017).

However, home ownership has been declining since the 1990s for younger people. And as people take longer to get on the housing ladder they build up less equity in their properties. You don’t need a crystal ball to see the long-term outcome of all of this.

Can custom build save us?

So in light of this cliff-edge generational shift, where does this leave the custom and self-build sector? Clearly, affordability will unlock a greater number of homes, but what counts as affordable? And what does normal look like in housing?

NaCSBA is aware that custom build must become more affordable, and is developing a model that will help this process (see the Andrew Baddeley-Chappell’s virtuous circle in the Summit overview).

But the custom build sector must do more to develop a range of affordable models, sticking purely to premium products is not the solution as the numbers of people able to buy these homes looks set to decline.

Bryan Green said, “If the sector wants to grow, it has to broaden its appeal to the less wealthy households, it must become normal.”

There are ways that custom build can help do this, not least by looking at modular or offsite solutions that offer scales of affordability. De-risking and simplifying the process also have their role  to play, to ensure that creating a custom build home is more easily realisable, making it accessible to a greater number of people.

Just like there’s no silver bullet for the housing market, there’s no simple way for custom build to achieve this. But our housing need is still there, and the country needs custom build as part of a whole range of models to delivering houses if we’re to create additionality.

The right environment for growth

The good news is that the door is partially open. Governmental and policy support is in place, and custom build offers the opportunity to engage with the public on a planning level. Meanwhile, cohousing offers innovation and solutions that are feeding into the wider market, not least in the area of retirement living.

There’s also a greater number of financial products available to service the sector, and more land will come to market as Government initiatives start to kick in, such as the 20% of council land being brought on as small sites, as referenced in the Autumn Budget.

As the wider population realises the gravity of the situation, our attitudes to development are changing, and custom build has the power to tap into this changing opinion.

This is because custom built homes engage locally, and often feed into the local economy as they use SME companies to deliver them. And with local connection tests on the Right To Build registers, it can also mean that custom build is providing houses for the local people.

Finally, in its favour, custom build offers a far easier route to a home than a conventional self-build where you have to research every element, from plot purchase to build route.

Having levels of access in custom build will enable a far wider range of people to engage with it, depending on how much or how little they want to get involved with the process.

The sector needs to bring these sites to market, and we need to educate consumers to its existence. But the opportunity is there, we just need to make it happen.

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2 Responses to “The changing face of self-build, and custom build’s great opportunity”

  1. KR.eativ says:

    I disagree. 'Self-Build' is not running out of steam or not providing for future generations. A well designed self-build home can serve multiple generations for many generations. 'Custom build' merely provides a choice of pre-designed solutions tweaked to be 'bespoke'. As a solution custom build is complimentary to self build NOT a replacement. Custom build companies should be aiming at replacing mass housing NOT the self build home market. Estates of serviced plots are not what self-build clients need, but is what custom build providers want.

    With the right architect led design team 'self-builders' have an advantage and get exactly what they need, not an tweaked approximation to those needs.

    • Duncan Hayes says:

      Thanks John. I don't think we'll ever not have self-build homes, they're beautiful products that are perfectly tailored to their owners. I think it's more a question of economics of how many people will be able to afford stand-alone plots to build premium homes to create them. The market will always be there to a degree but it must be capable of adapting.
      This is where serviced plots come in, as they offer some of the freedoms of self-build, depending on the site, but in far greater numbers with the challenges of plot finding and service connection removed. Enabled plots like these are still a form of custom build, albeit not one where a developer is necessarily on board, such as at Graven Hill. What Green's data indicates is that the traditional wealthy self-builders will decline in numbers – the average age of self-builders has gone up with time, and if it was a vital market the age would stay the same as new entrants replaced old.