Budgeting your Build - NEW
Adrian Wild outlines the key factors to address when planning your build finances
If you want your self-build experience to be as pleasurable as possible - and profitable if that’s one of your aims - then you need to budget the costs as accurately as possible at the outset. The last thing you want to do is overextend yourself financially.
The difficulty with estimating costs is the many variables within the building process. If you overlook a costly item you’re in trouble. The same is true if you assume incorrectly that you can source cheaper materials or resources. Your project could be delayed or, worse still, never completed.
This perhaps explains why specialist estimating services have become so popular. Forearmed is, as they say, forewarned.
You will need an accurate estimate to confirm that you can afford the project in the first place, to secure funding and to check that the quotes coming in from the building firms are on the right track.
Calculating the cost of getting your build out of the ground is probably the trickiest part of any estimate.
Above ground it is possible to define almost exactly what materials and labour are required for the construction. Below ground is a potential minefield for the unwary. Nevertheless, by taking a step-by-step approach you can lower the risk of nasty surprises.
Unknown ground conditions can throw up nasty surprises which may blow the budget.
The best way to assess the site for the first time is to walk over it, carefully examining the various features. Look for signs of unusual vegetation. This often indicates that the ground has been worked over. Are the owners trying to hide the site’s previous usage? Was there an existing property on the site? If so, what was that property? Is it likely to have caused contamination in the ground or are there old basements lurking?
These could cause significant problems when constructing new foundations. I would also recommend that you ask locals if they know anything about the history of the site - this is the moment nosy neighbours could be your best friends!
How is the site on a wet day? What does the ground feel like underfoot? Is it muddy, suggesting a possible clay substrate, or does the water appear to be draining away freely? After a dry spell are fissures apparent? Again, this could be an indication of heavy clay.
Clay and trees
The presence of both clay and trees can have a big impact on foundations and drainage. Some clay soils can be prone to shrinkage during dry weather, which means the soil will retract, causing the foundations to move and result in significant structural damage. Conversely, clay tends to swell in wet weather, causing heave and potentially more damage.
Existing trees may be a nice feature of a plot but they can cause problems.
Trees can have a similar effect. They tend to soak up ground water, increasing the risk of shrinkage. Don’t think that simply chopping down the tree will solve the problem, though. It will cause the ground to swell, risking more damage to the foundations.
The National House Building Council has a section in its standards, which provides a series of tables designed to assess the required foundation depths. This is certainly worth studying. The guide also provides advice for assessing the site. Whilst I don’t advocate carrying out the entire assessment yourself, it will certainly help filter out problem sites and avoid needless expense on detailed site investigations.
However, the presence of shrinkable clay in the ground is not always obvious, so it is worth having a word with a local building inspector to see if it is common in your area. If so, it will pay to arrange specialist soil tests to determine the characteristics of the ground. This, combined with an engineer’s report to make recommendations on the ground conditions, will cost from £500 to £1,000.
Armed with this advice (which you should certainly satisfy before legal completion of the plot), you can then begin to assess the likely additional costs.
In low shrinkage soils, which tend to be granular and more permeable, the foundations may only need to be about a metre deep. On the other hand, if the site has a highly shrinkable clay, with nearby trees, the foundations may need to be up to 3.5m deep.
Estimating your costs is much easier once out of the ground as the exact materials and labour can be calculated for the construction
The concrete foundation, including the additional excavation, could cost an additional £200 per cubic metre. This could add £10,000 to £20,000 to the budget of a medium-sized house, depending on the length of walls and depth of foundations.
The building inspectors and your insurer are also likely to insist on you using systems to prevent damage caused by lateral pressures due to ‘heave’ and possibly the provision of a suspended slab – again to reduce problems with movement. This could easily add a similar amount to your costs. The message is therefore clear – if the site features clay and there are trees, or even hedges, you may have some unexpected costs. Take advice early.
If the site features clay and there are trees, or even hedges, you may have some unexpected costs. Take advice early.
‘Made ground’ is essentially soil that has been subjected to human intervention. It may be fill material (structural or landfill), reworked soils (as commonly found on arable land), or a combination of materials from past demolition, reworking and importing.
This is often characterised by poor-quality vegetation or an apparently level site in a decidedly sloping area. My general advice is that unless the site is in a particularly desirable area, or is selling at a bargain price reflecting the problems, it is probably best to look elsewhere as even the most seasoned builder may get stuck in the mud!
When looking at made ground you will certainly need expert advice. What is the ground filled with and how deep is it? Is it contaminated? What foundations will you need to find a secure footing? Given the number of variables, it is impossible to give general guidance on costs.
If you don’t want to spend too much on a preliminary analysis, a morning spent with an experienced groundworker and a JCB will certainly be edifying.
Trial holes in several places should be no less than 3m deep – unless you hit good ground before then. If the landowner resists allowing you to carry out tests, leave the site to someone else.
When looking at a site, it is worth spending some time assessing the amount of slope. Over the years I have often been surprised at how steep an apparently flat or gently sloping site turns out to be. This can cause problems with drainage, and may require the installation of a pump, adding another £6,000 to £8,000 to your build cost.
Furthermore, if you have to create a split-level house, this can add significant costs in the form of retaining walls and waterproofing systems, all of which need to be constructed by specialist companies which offer suitable warranties.
Services and cables
There is always the possibility of services being buried under your plot. Normally, the existence of these would be revealed in the searches during the purchase process. Easements will have been agreed between the service provider and the existing landowner.
Overhead cables can also be a problem. They are expensive to move, and can make the project completely unviable. On a project I was involved with, the local electricity authority wanted £25,000 to move an innocuous-looking cable and transformer, so you should make enquiries about the costs of moving services before purchase.
In areas with a history of mineral extraction or coal mining you will need to take specialist advice to avoid problems with foundations and, to a lesser extent, drainage and services.
It is worth checking your area to see if there is any history of mining. The Coal Authority has an interactive map of mining areas in the UK.
Make sure that you budget not only for the build costs, but for all of the hidden expenses too. These include legal fees, site surveys and stamp duty, not to mention local authority charges, insurance, site accommodation and security.
As a rule of thumb, around half of your budget is actually construction costs with the other 50% split between design fees, plot, mortgage costs and preliminaries.
The cost of connecting to local water, gas, electricity, telecom and drainage services depends greatly on proximity to the highway and the location of the mains. Be wary of moving services on site as this can be a huge expense. Make enquiries before purchase.
Insurance and solicitors’ fees
You should ensure you are adequately insured for losses as a result of theft or vandalism on site. Allow for conveyance or solicitors’ fees and disbursements such as Land Registry fees and ID verification.
If materials are stolen from site, sadly you will find that you’re not covered for the time, inconvenience and any financial losses incurred as a result of delays in construction.
Security is an issue on unattended building sites where theft can be a problem. Warnings should be posted about any potential dangers, even for unauthorised visitors.
Therefore you need to implement measures (at a cost) such as a secure container, fencing, and security lighting. A slightly drastic option is to employ site security guards. I know of a small number of self-build sites that have been repeatedly raided, with the only deterrent being permanent security on site.
Stamp duty land tax
This applies if you buy a property or land over a certain price in England, Wales and Northern Ireland. The current SDLT threshold is £125,000 for residential properties and £150,000 for non-residential land and properties.
On a piece of land costing from £125,000 to £250,000 the fee is 2% and for land costing between £250,000 and £925,000 it is 5%. However, as one of the coronavirus relief measures implemented by the Chancellor, there is a stamp duty holiday on properties worth less than £500,000 until 31 March 2020.
How much SDLT you pay depends on whether the land or property is for residential, non-residential or mixed use.
How much you pay depends on whether the land or property is for residential, non-residential or mixed use. You can use the stamp duty land tax calculator on the HMRC website.
SDLT no longer applies in Scotland. Instead you pay Land and Buildings Transaction Tax (LBTT) when you buy a property. In Wales, you may need to pay Land Transaction Tax (LTT), which replaced SDLT in April 2018.
House builds are largely zero-rated for VAT, so you can reclaim it on most building services, materials and fixtures as long as they form a permanent part of your new home.
You can only make one claim and it must be within three months of Building Control (or similar) issuing a completion certificate.
Be careful not to claim for a part of the build that was not on the approved plans. Anything you add must have approval in writing from the planning authority, otherwise the build will be deemed unlawful. You would be better off not claiming for any add-ons.
Architects’ fees can cost as much as 15% of the total build cost for a full design and supervision service. However, there are plenty of good architectural technicians around who will design a property for less. It’s then up to you whether you engage them to supervise the works to ensure that the job is carried out in accordance with the specification. For obvious cost reasons, many builders do not take up this option.
Fees for the design and planning permission need to be factored into your budget.
It is worth noting that the design and specification of your build can massively increase your outlay by anything up to 100%. You need to brief your designer truthfully on your overall budget and ask them to consider this carefully when designing the property. For example, plain handmade clay tiles could virtually treble the cost of your roof compared to standard concrete ones.
Layout and materials
Have a really good look at the drawings with the various trades. Send them advance copies inviting them to comment on any problem areas. You will be surprised (but informed!) with what they come up with.
Have a really good look at the drawings with the various trades.
Brickies will ask about brick sizes and problems with coursing, corbel details and your choices of sand and mortar. Plumbers will need to know about boiler positions and motorised valves, trimming around soil stacks, shower tray levels and the position of the toilets. Roofers will get excited about flashings around chimneys, whilst electricians will want to know about the positioning of consumer units, sockets and light switches.
This means you need to have planned ahead and designed your kitchen and bathroom layout as well as a layout for the lounge and bedrooms, particularly where the TV or telephone sockets will be positioned.
You’ll be charged a fee for detailed or full planning permission for a new build. And you’ll incur a further cost should you need to request additional approval on details such as materials or landscaping.
When you make your planning application, you must advise your local authority that you’re a selfbuilder and that you’re seeking to claim exemption from the Community Infrastructure Levy (CIL).
This is crucial. It’s not an easy process and if you slip up at any point you could be liable for the full payment, amounting to thousands of pounds – possibly enough to make the project unaffordable.
When you invite tenders from contractors include as much detail as possible so they can provide a comprehensive quote. When you receive the tenders, make sure there are no oversights that will come back to bite you later.
Wherever possible avoid ‘PC’ sums in the quotes.
These ‘prime costs’ are put into the contract to allow you to select a particular product at a later date. For example you may include a PC sum of £10,000 for a kitchen. The contractor will normally expect to make a profit on these as he has the work of supplying the materials for you and takes the risk that they will be fit for the job and not damaged (or stolen) during the building works.
If you want to save money by buying at trade prices, you should organise the timely purchase of these items.
‘Provisional sums’ are often included in quotes to make allowance for areas of uncertainty, such as groundworks or drainage or where it has not been possible because of time pressure to get detailed quotes for various items. If possible you should avoid provisional sums as they often produce costly surprises for all parties.
Ask contractors to supply a schedule of rates for items where unexpected costs can arise, such as the additional cost of excavating foundations and removing the spoil from site. Make sure that these rates are competitive and have not been loaded.
Day rates is the term used to describe when, rather than extracting a fixed price for a job, you get the contractors to come along and be paid by the day. This is your worst nightmare. Anecdotal evidence suggests that the speed of trades such as joiners and brickies can halve when they move from price-work to day-work. The best advice is to avoid day rates like the plague unless you are 100% sure that your tradies are real grafters.
Day rates for builders and subbies should be avoided at all costs.
To get competitive prices prepare a comprehensive schedule of all materials required right down to nails, screws, mastic and paint.
To get competitive prices select two or three builders’ merchants to price for the entire project. They are more likely to reward loyalty with good discounts.
Once materials start to be delivered, it is essential to check your receipts and invoices. This will allow you to spot any discrepancies between what you thought you ordered and what was delivered. Check too for damage. Once you’ve signed it’s often too late to make a valid claim for a replacement.
You should then create a ledger or spreadsheet so that you can monitor your actual costs versus your budget for both labour and material for the various phases of the project. Labour is an expensive resource to have on site so it is crucial to remain one step ahead by checking your local supplier’s delivery dates. There is no point in saving a few quid on materials if they arrive late and leave your schedule in tatters – and with a fat labour bill because the work on site came to a grinding halt.
A realistic timetable is useful when it comes to estimating the cost of finance and other on-site costs. You will be surprised by how quickly finance costs can eat into your budget (running into thousands of pounds) if your project extends beyond your completion date, not to mention the additional costs of renting temporary accommodation, onsite toilets, containers, scaffolding, mixers and other plant equipment.
Using your detailed estimate, review it phase by phase to compare your estimated costs against the actual costs and tailor your spending accordingly once your build is underway.
Adrian Wild is founder of HBXL Building Software and the Cost My Self Build estimating service.
This Beginners Guide appeared in the January 2021 issue of SelfBuild & Design magazine
See also Gerald Cole's blog page Topping Out: Six hidden costs - Self build's worst budget busters »