TOPPING OUT - GERALD COLE

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The Kids are Not Alright

Can self build give millennials a home?

Given the choice, which would you rather be today: a millennial (in your 20s/early 30s) or 60-plus? 

Assuming you’re neither, most of us, I suggest, would leap at youth. Peak physical strength and attractiveness, freedom to run, jog, climb or breakdance (should you choose) without risking a visit to A&E, or worse – what’s not to like? 

Those nearer that age, however, or with better memories, might remind you of horrendous youthful blunders and embarrassments, let alone the agonies of romance. But arguably the most significant, and long-lasting, downside for today’s millennials is the ability to afford a home of their own.

Ten years ago the average house purchase price, according to the Halifax, was £142,473. Today it’s £250,457

Ten years ago the average purchase price, according to the Halifax, was £142,473. Today it’s £250,457. Just over a year ago that was over eight times the average wage, with London and the South East up to 11 times. Since then, despite the pandemic, there has been a mini-boom, largely fuelled by the Chancellor’s stamp duty holiday on properties below £500,000. 

Britons have, of course, become accustomed to rising house prices. The biggest purchase most of us will ever make is also likely to be the most profitable. Read the Sunday Times’ Fame and Fortune page where celebrities are interviewed on their financial habits. A standard question is: what’s better for retirement, property or pension?

But it’s a question that’s becoming increasingly academic for millennials. While 65 per cent of 18-to-40-year-olds would like to own a property, according to a 2016 survey, the time they would need to spend saving for a deposit has risen from three years in the 1990s to 19 today. That’s largely thanks to near-static wages and stringent affordability tests by lenders - no more 10 per cent deposits or interest-only loans – despite rock-bottom interest rates. 

Meanwhile baby boomers, not unlike myself, who were able to buy in their mid-20s – admittedly at full financial stretch – only had to sit quietly to watch the value of their property climb. As a magazine illustrator remarked to me some years ago, “My house has earned far more money than I ever have.”

He was helped by a council tax system that bases its valuations on the market values of property on April Fool’s Day, 1991 in England and Scotland - a time when the housing market was crashing, thanks to spiralling interest rates. Add ever-increasing rates of stamp duty and house buying has become steadily more expensive.

Help to Buy

It’s not that governments haven’t made efforts to redress the balance for younger buyers. The longest lasting is the Help to Buy scheme, recently extended for another year. This allows first-time buyers to borrow up to 20 per cent of the cost of a new-build home (40 per cent in London) with a loan that’s interest-free for five years, pay just a five per cent deposit and cover the rest with a specialist mortgage.  

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Over 200,000 first-time buyers have benefitted, but ever rising prices are needed for them to move on. Which? magazine revealed recently that one in seven Help to Buy homes lost value in the scheme’s first six years, despite local prices rising, leaving them in steadily rising debt. It also suggests that participating housebuilders have added a Help to Buy premium to their prices. 

Even more troubling is that, despite industry assurances, new builds from the big builders who dominate the market continue to produce examples of poor design and construction.

New builds from big builders who dominate the market continue to offer poor house design and construction

But what if millennials were offered something other than a new, small, over-priced box? Self build might only seem a choice for the well-healed or the asset-rich downsizer, but it comes in a variety of forms. 

Self build comes in a variety of forms

Self build comes in a variety of forms. Perhaps the best known alternative is custom build. Here, a developer or a local authority provides a development of several plots, each coming with utilities as well as boundary and planning permission already granted for a variety of designs. These might be provided by a package house supplier who can build the house for you, you could employ an architect and builder to do the same, or you could simply commission a weathertight shell which you can complete yourself over time or when finances permit. 

Custom build is commonplace in Australia, Japan and many European countries, including Holland, Belgium and especially Germany, where self build is 60 per cent of the housing market.  

Community self build can reduce costs even further by combining the resources of like-minded individuals, often organised and financed through housing associations. Members work together to build their homes collectively, contributing finance, labour, known as ‘sweat equity’, or both. The result is a home either owned outright or rented affordably, often with an option to buy over time.

Local authorities are obliged to keep a Right to Build register where local individuals or groups can register their interest in self build. Not all councils, though, have complied; some have even imposed annual charges for registration. The government, however, has pledged £2.2 billion in loan finance to custom and self build in last November’s spending review. 

The government pledged £2.2 billion in loan finance to custom and self build in last November’s spending review. 

Will millennials be tempted? Well, according to a recent survey by the National Custom and Self Build Association (NaCSBA) and the Building Societies Association, nearly half of 18-to-24-year-olds are interested in designing and building their own home. 

It’s a tougher option than simply picking up the keys to a newly built developer’s home. But it’s guaranteed to be a life-changing project and a lot more satisfying than servicing an expensive and insecure flat lease for the next 19 years.