How much does it cost to build a house

Generally, for a new build, architect-designed home in London or the South East, a minimum construction cost might be in the region of £2,500 per square metre, plus land acquisition and professional fees. Therefore, a typical four-bedroom detached house of 160 square metres could cost a minimum of about £400,000 to build.

If higher quality finishes are required, the cost to build a house can reach £4,000+ per square metre. The addition of basements will increase the rates still, from around £6,000 per square metre for basement works.

[edit] Factors that affect construction costs

For new build homes, the following site and design issues will have a material impact on construction costs:

[edit] Site issues

• Constrained sites
• Difficult site access
• Parking permits required during construction

[edit] Design issues

• Non standard forms of construction
• Specialist foundations
• Large expanses of glazing
• Branded kitchens

[edit] Additional cost considerations

[edit] Buying Costs

These include solicitors’ fees, survey fees and Stamp Duty Land Tax.

[edit] Finance Costs

Finance costs will vary depending on the amount of loan required and the loan as a percentage of the total build cost. If you have a large cash sum to contribute, you will be able to take advantage of lower borrowing rates. If you require 100% borrowing for both the land and the build costs, then the number of lenders is restricted, and interest rates will be higher. 100% loans are typically released in stages when required, with only the sum needed to buy the site released initially.

[edit] Consultants Fees

Fees for all consultants will vary depending on the size and complexity of the project. Remember to allow for an architect, structural engineer, services consultant, approved inspector and a party wall surveyor.

[edit] Site Purchase

This varies considerably depending on the size and location of the plot. The other key variable is its planning status. A plot with consent for a house will be more expensive than the same plot without approval. There is, of course significant risk involved in buying without planning consent, but the uplift in value can be considerable.

A ‘subject to planning’ offer may be beneficial for both parties, as it helps to reduce the buyer’s risk. This also ensures that the vendor achieves a good price for the land.

[edit] Tax Considerations

There are a number of tax benefits for new build houses:

[edit] Stamp Duty

Buying a plot of land usually results in a stamp duty saving when compared with buying an existing home. The stamp duty will be calculated on the value of the land only. This is typically much less than the value of land with a house already on it. If the new build house is going to be a second property, then the potential savings are larger. This is due to the higher SDLT rates applied to second properties.

[edit] CIL

Whilst Community Infrastructure Levies can be considerable in London, self-builders are usually exempt. Individuals claiming the exemption must ‘own the property and occupy it as their principal residence for a minimum of 3 years after the work is completed’.

[edit] Planning Contributions

These vary considerably, but in London, many Local Authorities require financial contributions to help them build affordable housing elsewhere in the borough. Generally, in outer areas, these do not apply, with central zones having the highest costs.

[edit] VAT

VAT is not payable on the construction costs of a new build house (see gov.uk for full details). For work to be zero-rated, it must qualify as a “genuinely new, self-contained house or flat”. Please note that VAT will still apply to consultants’ fees.

[edit] CGT

Assuming that the house will be your principal private residence, generally, there is no capital gains tax to pay if you make a profit when you sell a new build house.

--BenRidley