The hidden costs of building Part 2

Last month we considered my top 5 hidden building costs including site appraisal costs, finance fees, trees, sloping sites and site acquisition costs. This month we’ll concentrate on my hidden costs 6-10.

As well as basic build costs involved in the actual construction of your home there are a number of “secondary “ costs that are often forgotten or miscalculated during the budgeting stage such as connection to services and insurance.

  1. Design costs

Architects fees can cost you 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 your house for £2-3000, its then up to you whether you then engage them to supervise the works to ensure that the job is carried out in accordance with the specification. For obvious cost reasons, many people do not take up this option.

Be very aware that the design and specification of your build can massively increase your budget by anything upto 50-100%. You therefore need to brief your designer properly on the overall budget that you have in mind and ask him to think carefully about your financial resources when designing your home.

Planning drawings £1500-3000

Building regulation drawings £1000-2000

Planning Fees £300-1000

  1. The Specification

The specification you adopt will have significant impact on your budget. Consider for a moment that you can easily spend between £200 and  £500 per 1000 on your bricks, £8 to £20 per m2 for roof tiles, and £5000 to £25 000 (at least!) on your kitchens.

You can see therefore that quoting “standard” square footage costs can be a nonsense… it is perfectly possible for the square footage costs to vary between £40 and £120 per square foot, depending on the quality of finishes (and the level of supervision provided by professionals).

Cost variance on a 2000 square foot house anything upto £100,000!

  1. Connection to sewers & other services

The cost of connecting to local services depends much on your proximity to the highway and location of the mains. Be wary of moving services on site as this can be a huge expense. A local electricity company once wanted £25 000 to move an innocuous cable and transformer which crossed my site   Fortunately, I was able to demonstrate this to the vendor and negotiate a reduction on the land. Make enquiries before purchase!

Typical connection fees for water, gas, electricity, telecom and drainage £3500-6000

  1. VAT

One of the big benefits of self-building a new home is that the building work is free of VAT, usually charged @ 17.5%. You normally have to reclaim the VAT paid in one lump sum at the end of your project (within 3 months of completion). It’s a significant upfront outlay so you need to ensure that your cashflow covers you for this. Criteria for reclaiming VAT include that your project must be a new build for the purpose of it being your own residence and not for selling on or leasing. You must also be able to show all your receipts & invoices. You will not be able to claim back VAT for professional services e.g. Surveyors or Engineers or for plant hire, scaffolding, air conditioning & shrubs amongst others! *

If you are renovating a property you will not be able to reclaim the VAT unless the property has been vacant for more than 3 years before you commence the work, in which case a reduced rate of 5% is applied. If you are changing the number of units of the building, a reduced rate of 5% is charged. Properties empty for over 10 years are treated the same as conversions, which are mostly VAT free.

Think very carefully about major refurbishments. Very often, with refurbs, by the time you have stripped off the roof and gutted the building you are only left with a few wobbly walls (without foundations!). Is it better to flatten the lot and start again, thereby avoiding the VAT? Remember if your build cost is £100,000 the VAT man is going to help himself to £17,500 of your dosh!)

Typical VAT on £100,000 refurbishment would be £17 500

Typical VAT on £100,000 new build would be £0

10.Insurance

You need to be adequately insured for public liability, employers liability and contract works insurance. The cost of claims resulting from thefts from site or accidents far outweighs the cost of insurance in the long run.

Many of your contractors will have their own insurance but I wouldn’t recommend on relying on this. You will also require a structural warranty if you wish to borrow money to pay for the build to insure it against any structural defect. This means solving any problems that arise during the build and latent problems. Up to 10 years after completion, are remedied.

Public liability, employers liability and contract works insurance £500-1000

Structural Warranty £700-1500

Adrian Wild is the Managing Director of HBXL, the developers of leading EstimatorXpress software and Estimating Service. To find out how we can help ensure you provide professional, accurate quotations, give Ian a call on 0117 9167894, or drop us an email.

*Contact your local Customs & Excise VAT Office for full details of excluded items. For further information on reclaiming VAT contact your local Customs & Excise VAT Office and read the Customs & Excise Notice 719 ‘Refunds of VAT to DIY Home Builders’