Prisk admits self-build market has far to go; Lloyds to push kit homes

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Housing Minister Mark Prisk has admitted the idea the self-build market had grown to maturity in the last three years was “false.”

Despite previous housing Minister Grant Shapps’ grand-standing claims in 2011, self-build could double over the next decade, Prisk admitted the obstacles to a flourishing self-build market remain substantial.

Housing start figures from building firms out today at 27,370 in Q1 were 4% down on the previous quarter, with the self-build sector estimated to be at 12,000 last year.

The research on the self-build market from University of York Professor Janet Ford out today revealed the sector remained small, niche and slow moving with the average build taking two years.

Availability of land remained the biggest obstacle, she said, but finance was fast becoming a challenger.

On the lending side, Ford added limited and standard product choices, poor provider communication, a disproportionate risk assessment as well as limited options for those on low income continue to hold the sector back.

She said lenders also admitted the business case for self-build remains unclear with low customer volumes making it difficult for lenders to fully assess lending risk. Another considerable concern for lenders was the “time limited” nature of government initiatives with 170,000 new homes targeted by 2015, despite the fact it would “take time” to effect any real change, said Ford.

Despite predictions from Datamonitor the market could grow 141% to reach £1.9bn by 2015, the lack of integration of self-build with other government affordable first-time buyer schemes are another factor holding market growth back.

Report recommendations include offering guidance to potential self-builders, limit risks, smooth lending processes and consider working in consortia with other lenders and developers to build large-scale self-build sites.

Lloyds Banking Group’s commercial director Stephen Noakes said BM Solutions lent 25% of UK self-build mortgages but planned to invest in ‘kit homes’ because the build time was short and the cost volatility is low.

“This report has prompted us to review our current self-build lending policy and as a result we will be considering mortgage applications from those building kit homes.

“Kit homes can provide a simpler option for those looking to build a home and offer more certainty over the total cost of a project. The speed of the process also means that kit home projects are often more modestly priced compared to other ways of building a home, making it a more accessible option.

“There is a definite opportunity here so we will raise our maximum LTV and simplify the stage payments for these mortgages. But success in this area will take a concerted effort from the lending community,” he added.

However, chairman Richard Bacon, MP for South Norfolk rounded the session off with a rousing call to arms to the 50 or 60 industry members in the room to create momentum in the self-build market because “the housing market doesn’t work.”

He quoted a song from Chitty Chitty Bang Bang, ‘When it gets depressing, it’s a blessing,’ suggesting ‘belief’ has a role to play in re-energising the market.