An academic from Goldsmith's University in London is releasing a new study today called "The Social in Self Build"

A few more details of the study can be found on the Goldmiths website here:
http://www.gold.ac.uk/news/homepage-news/beyondgranddesignshowdowegetmorepeoplebuildingtheirownhomes.php

Mark Brinkley also mentioned it on his blog yesterdy and suggested the full report would be launched today.

I don't live too far from the exhibition about the study which is being put on in New Cross, London, so hope to pop in tomorrow.

I went to the exhibtion on Saturday and had a brief conversation with the lady who had performed the research / written the papers.

The biggest themes I took away from the exhibtion were:
1. The financial struggles for self builders and the mortgage market needs to be more friendly towards us
2. Self builders need to have strong relationship management skills to manage the contractors, architects, engineers etc... that they have to deal with along the way
3. The difficulty in finding land

I'm not quite sure who funded the research, but I get the impression it will be used as evidence to try and lobby for change.

Posted By: richardelliotThe biggest themes I took away from the exhibtion were:
1. The financial struggles for self builders and the mortgage market needs to be more friendly towards us
2. Self builders need to have strong relationship management skills to manage the contractors, architects, engineers etc... that they have to deal with along the way
3. The difficulty in finding land

There are alternative views:
1: They just assess risk and profitability, they are not emotionally involved in a building.
2: That says more about the unprofessionalism in the building industry surely.
3: That is a two fold problem, the main one is the price, many self builders want prime plots at below market value, and, lack of approved building land being released onto the market place.

I'm not sure I understand the risk aversion argument from banks. My stage mortgage is arrears style so at any one time I'll have made the worth of the property somewhere between "more" and "far more" than what I owe. Couple this up with being required to buy an insurance policy upfront that would build the house if I didn't and it's suddenly a very attractive investment .. With a 60% LTV a huge amout of my own money and borrowings are tied up and For the paltry sum (ie what they've loaned so far) of approx 25% of the projected end value, my BS could currently foreclose on a wind and watertight shell on a half acre plot. I get jammed up for 6 percent interest because "it's more risky than a traditional mortgage"

Bullshit

I think part of the banks concerns in the UK is that, in the past, we have had volatile interest rates that were politically motivated.
This often lead to a boom-bust economic cycle. Housing is often affected by this, think back to the early 90's, early 80's, mid 70's. This is what the banks seem to remember.
Getting the BoE to set interest rates was one of the few good things that the Blair government did. It allowed stability for business, the down side was that we have experienced very cheap money, often below inflation rated for a decade now. Because of this, it is often seen as easier to invest in assets with housing being with easy one. There have been times recently where you can just buy a house/plot of land, do nothing to it, then sell it on for more than you paid for it. There are very few things that you can do this with.
The trouble is with this, is that the banks have not made much out of it. Many of the property speculators used cash, rather than borrowed money, to finance the deals. This leaves the banks with a customer base that had less cash to spend, at the time that the banks knew they had less cash as well (why RBS sold shares when they knew they were in trouble, but failed to mention it to the investors). So what has happened is that house sales to normal people has declined, leading to less perceived demand (from the lender's viewpoint), and a stagnate market in the normal housing market (the mean value is now highly skewed to the higher value places, and the banks know this).

Sadly the general public feel powerless, but this need not be the case. If, and this will take some work and nerve, everyone that wants to buy a house, went to every estate agent in their town and said how much they can realistically borrow (approx 3 times household income) and asked what is for sale at that price, the message would get though. But none of us bother, we just look for all sorts of reasons as to why housing and building plots are high priced. We blame councils for not releasing land, but don't get elected to the council, we blame banks for not releasing money, but never go to shareholder meetings, we blame the old, past policies, immigrants, greedy landlords, the job market, the list goes on. But we never do much about it. So where should the blame really lie.

Having just been pointed here, I think the reason banks are risk averse is because society and the govt have spent the last 8 years lambasting and reregulating them to *force* them to be more risk averse. More capital buffers, merchant banking isolated from deposit taking, much more salary much less bonus etc.

We can't really complain that they apply criteria to minimise risk after that period.

Ferdinand

Sorry bot, but I disagree completely for reasons mentioned in my post above. I owe my bank 70k and if they foreclosed they would end up with a 250sqm shell on half an acre, in an area where a completed house with a garden the size of a postage stamp was worth at least 300k. There would be a queue out the door for people to fill my shoes, and thats if they didn't claim on the insurance they forced me to buy that would finish the build if I didnt. Add in the double interest I pay compared to joe public on a standard mortgage and investment prospects in these times don't come more rosy. Some self builders then pour huge amounts of their earnings and personal time into the project and they would never be compensated for that. If I had the cash and someone came to me asking to borrow on the proviso that I never loaned more than 60% of what a thing was worth, they would increase its value for free and if we fell out I could have the entire thing, I'd jump at the chance

Risk averse, my arse. Risk illusionist more like. Perpetuating that myth can only serve them well


But then I realise, I've more or less repeated myself from last time :) broken records..


So what to do about it? Government has the cash; get into the lending market and lend to self builders. For sure most government workers don't have a corporate mindset and work on the approach that every year they get a budget that needs spending, rather than a sum of money that needs curating so it grows but it's relatively simple to grow it like banks do by giving it to self builders who then give more back (and if they don't, give the project to another self builder on the list who will). Compete wih traditional banks, better rates, better LTV, stir up some appetite for risk. That dissolves the third argument.

Second, helping people form contractor relationships? Well the goverbank has the money, the contractor needs the money, the goverbank can hence be a source of work and income so it can be the introducer, monitor the relationship, run an eBayesque feedback service, assess contractors work and maybe introduce standards of work that will ensure homes get built to good energy efficiency etc beyond building regs. We can take a guess at how much money it takes to operate in this way by looking at eBay fees perhaps. There is a considerable customer service input into the eBay paypal model and fees are around 10%.. Sounds like the fee an architect charges for PMing. Perhaps that's what goverbank would need to charge upto, to facilitate he drive to self build

A bank is most likely to have to foreclose when the property market is having problems.

This is the time when it is most hard for the next owner to get a mortgage; therefore the bank may only be able to sell to a cash buyer. The bank will also be looking for a quick sale and any buyer is unlikely to put much faith in a unfinished building.

Posted By: djh

Posted By: cjardGovernment has the cash

You're joking of course! Government has a huge debt, getting bigger all the time.

They appear to have enough cash to lavish on first time voters buyers.