In the current climate, is a self-build (potentially) instant negative equity?

I'm currently at the planning application stage of a self build but am becoming more-and-more disheartened with the process and the time it is taking and will take.

Over the last couple of years I repeatedly here that it is "cheaper to buy than to build". On Saturday I heard this again on the radio, that when completed a self-build is worth about 20% less than it cost to build it.

So, if you have a half-acre site worth, say €30k. You get a 90% mortgage on the house, which cost, say, €300k. That means that the mortgage is €270k and the value of the property is €264. Is this correct, close to correct or off-the-wall?

Belton;

Other than in the fluffy times most self builds walk straight into negative territory.
On the plus side,
You have built where you want, the house is what you want ; However if you wish to sell there is no guarantee that your house will be what a purchaser wants.

No doubt that in most places today ,you can buy a servicable house in most places cheaper than you can build.
The Question is , is this new house ,the Home YOU want .

I do not see your stab @ the figures being off the wall.

Bear in mind also that the spec that you are getting prices for the new house are bound to be over and above a house you buy. Certainly in terms of insulation and windows anyway.
If it's the house you plan to build and live in for the forseeable future then the NE aspect of it shouldn't really come into it.

This is a very grey area. I recently built a home and I believe it is not in negative equity (based on similar properties on PPR). However it could be slightly in negative equity based on other similar properties on PPR. So it depends on whether you go direct labour, with a builder or hire a project manager etc. But it also depends on how desperate you would be to sell the property as this can have a big influence on the price you could get for it.

Clear as mud

Thanks.
Just about all of what is said above I agree with.

However...

Gerry Canning said:

Other than in the fluffy times most self builds walk straight into negative territory.

Click to expand...

... apparently not. Even before the housing bubble days, say the 80ies and 90ies, a self-build could be sold at about 20% above the build cost. Or so they were saying on the radio, and this had always been my assumption too.

Anyway, not looking to split hairs.
Thanks again.

Is there a reason why planning is taking so long? It should take 8-12 weeks. If you are gifted a plot of land to build (even better of there are a few acres with it) then I think self build is the way to go. I think you have a better chance of selling the house in the future if (1) You use an Architect (2) It is built properly (3) It is not too big or not too small (150-200m2) (4) There is some land with it (hobby farmer potential buyers in the future)

Good question! We went to a pre-planning meeting and they pointed out a couple of things they did not like. We removed these accordingly and submitted the application thinking that it would be straigth forward (as a result).
Alas, they came back with about 10 brand new issues, of varied hues, none of which were suggested initially. What really got my goat is that a few of these contradicted things in their own planning guideline publication.

As well as this the road is quite twisted and access is an issue. There is just one straight section of road about 400m in length with our proposed entrance at one end of this. To the left we have just 80 metres, and to the right the remaining 300 metres or so. Phew! However, they've decided to move the goalposts on this one, and set the required sight lines to 90 metres. They've stipulated that I'll have to remove an entire bend in the road so as to provide these sight-lines. The length of hedgerow to be removed amounts to about 300m, and and the ground lost I'm guessing is up to half an acre. I'm sure that such works will also result in environmental impact measures due to the loss of wildlife habitat being incurred.
This expense is something we had not anticipated, and is only being incurred because the planners have decided to extend their sight line requirement from 80 to 90 metres.

I've watched a few of the Channel 4 "property porn" shows and know only too well of the financial overruns that happen. Fortunately, this particular potential overrun is front-loaded so we can re-evaluate before we've any serious money spent.

Hi Belton,

By what you are saying it seem's that you intend to build in a rural area?
If so I'd tread carefully. I too am from a rural area (Hundred miles past nowhere in Kerry) but made the decision to build in Killarney town as: A) there is close by services B) Schools C) Transport links and D) Demand for good quality larger detached 4+ bed houses in walking distance to town. E) Location location big price difference in the town it's self.

There is a definitive price difference in Killarney of houses in the town versus even houses 2/3 miles out.

You may want this house due to being from the area, but ask yourself would it appeal to someone not from the area by referring to points A to E above ?

Than you will get your answer re negative equity.

Hi johnnykerry,
Yes, it's a rural area. My original post regarding negative equity was just a thought I had and was interested to see what others thought.
I suppose we're going off topic a bit but maybe the moderators will permit me to answer you. I'd hoped to build as discreet a house as possible on this rural site. Ideally I'd leave as much of the existing features, e.g. trees, hedgerows, etc, as they are. I like the thought of having the entrance (which is currently a gateway into a pasture field) flanked by the existing rural hedgerows, which have been there for generations. Instead I'm being permitted one of these, then on the other side a new construct of some sort. I'm not sure if this is to be a ranch style fence, a wall, whatever. Either way, to have an established hedgerow on one side and some modern replacement on the other, is not what I envisaged. It would look ridiculous and out of place.

So yes, I am now treading carefully. There are numerous advantages of a rural self-build and some disadvantages. But there are now a number of new disadvantages cropping up. It's a trade off, and things are starting to swing against the self-build option.

Don't rule a self build out just yet.

In regard to existing features if you want to keep them prove your point. Show presidents in the area with the same and how it would be more in keeping with a rural area than a new construction wall etc. If you have an architect get them to do a visual of both options "Picture is worth a thousand words"

Go through the planning guide lines as I pretty sure there is favor on the side of a more natural roadside.

And finally yes you can buy cheaper than build but an opportunity to build what you want may only come once versus a lifetime in something quiet literally "thrown up" by someone for a profit which will have higher running costs.

Roll the dice and remember there is no tow hitch on a hearse..