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Self-build mortgage market set to rise

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The UK self-build mortgage market is set to more than double in size by 2015

Research by Datamonitor indicates that mortgage advances for self-build properties will rise from less than GBP800m in 2011 to GBP1.9bn by 2015. Growth will be fueled by growing consumer awareness of the self-build option, coupled with government measures to help those wanting to pursue this route to home ownership.

The UK mortgage market remains badly affected by the inability of providers to significantly increase lending, together with consumer reluctance to extend their borrowing in such uncertain times. Datamonitor expects gross annual mortgage lending across the whole market to fall from an expected GBP138.5bn in 2011 to just GBP127.0bn in 2012, before rising to GBP182bn in 2015. This represents an increase of just 31% on the relatively low 2011 amount.

Over the same period, gross advances for self-build mortgages are expected to increase from GBP790m in 2011 to GBP1.9bn by 2015, an impressive rise of 141%. This growth will be driven by a number of factors, one of which is the fact that more consumers are becoming aware of the self-build option. This is largely due to the influence of TV programs like Grand Designs, the desire for more individuality and self-expression, and the perceived low quality and poor design of many new-build properties. The availability of quality materials such as timber at lower prices ahs also encouraged people to use timber construction specialists instead of traditional brick buildings.

Perhaps even more significant than this is the fact that the government's recently published Housing Strategy report has outlined a number of measures to facilitate the self-build path towards home ownership. Among the report's recommendations are moves to encourage local authorities to establish demand for self-build housing in their jurisdictions and take steps to satisfy this demand. The report also calls for the government to increase the amount of land available for self-build plots through its accelerated public land disposals program, the creation of a one-stop shop for the provision of advice and information to self-builders, and for the appointment of a "Custom Homes" champion to raise awareness of self-building and promote its benefits.

The UK lags behind many other countries in terms of self-build properties. It is estimated that just one in 10 newly built properties each year are constructed by their owners, compared to over 80% in Austria and over 60% in France, Germany, Italy, and many other markets. However, a recent survey by the Building Societies Association revealed that 53% of consumers would consider building their own home if it was easier for them to do so. If the government's reforms are successful in freeing up the market, the UK could be on the verge of a significant cultural shift with respect to house building, one which could create new opportunities for smaller and specialist lenders seeking to differentiate themselves from mainstream mortgage providers.

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