Ask an Architect: Should I Worry About Inflation?
Linda from Wimbledon asks, “My husband and I are weighing up our options for a new family home. Where we live, prices have shot up as much as 20%. It’s making building our own home very tempting, but is inflation any less of a factor for a self build?”
House price inflation dominates the headlines in property news, but those seeking to escape the house price premium by self building will find themselves at the mercy of the less discussed construction inflation.
First, how did we get here? Like everywhere else, the construction industry was hard hit by the recession. Tender prices dropped rapidly or were held at as low a rate as possible. Contractors were desperate to work but there simply wasn’t enough going around and new builds slowed an agonising pace. Factories followed suite and reduced their output.
Now raw material prices are rising but we’re still stuck at a reduced rate of production and suppliers are no longer holding a stock surplus, relying instead on quick transportation on order. Bricks, for example, are currently on a four to five month lead in period.
With construction works gaining pace, contractors are back in business but material costs are pushing their prices up by around 10% per annum. If you have £1 million to spend on a contractor today, you need to consider that in twelve months the value will be £900,000.
There’s no denying self builds are becoming more expensive. It’s certainly a challenge for us, as we’re having to squeeze more out of a client’s budget than ever before, with a firm emphasis on tighter, better value design that maximises every available asset.
Budgets aren’t a factor you can simply set and forget. Depending on the scale and complexity of the build, total project time from inception to completion can be anywhere from a few months to a few years. Every passing day is another tick in material costs and the interest rate you may have on your savings won’t be able to keep pace with this inflation.
The bottom line is that the budget you set at the beginning of a project won’t be enough to see it through to completion if you fail to factor in inflation. Hearing this is never easy, but being upfront with costs avoids the far worse scenario of having a half built home without the capital to finish it.
While no one wants to rush major decisions, this does add an element of urgency to the process. Advice on realistic project costs and timescale needs to be sought as soon as possible.
As soon as we start the process with our clients, we use our huge amounts of data and insight to produce a projected cashflow forecast, allowing you to plan long term financing. For a three year project, you would need to weigh the benefits of potentially paying 30% more, building less expensively or building faster.
Paying more than planned is rarely feasible or responsible and building speed is physically limited, so often a reduction in scale is the only option. As disappointing as it can be to find your budget comes up short, the adaptability of contemporary design makes rethinking your space a far more cost effective option than trying to deepen your pockets.
Most people are accustomed the traditional house design of cellular rooms connected to a central hallway. These wall-packed houses block natural light and movement, resulting in warped popular perceptions of space, favouring raw square footage over intelligent design.
Replacing numerous, isolated rooms with open plan spaces filled with as much natural light as possible can make even modestly sized (and modestly priced) houses feel refreshingly expansive.
De-cluttered, simplified spaces with well integrated storage avoid the problem of the “room we never use”, a phenomena that is money wasted for a self builder. By fully understanding the lifestyle, needs and tastes of our clients, we can create houses that are perfectly fitted to them without a single penny or millimetre wasted.
This precision isn’t possible without bearing in mind the rising costs of material. Understanding and adapting to inflation is the only way to create a truly perfect home.
If you have any questions of your own, send them to [email protected] with the title “Ask an Architect” and they could be featured right here in our blog.
By John Dyer-Grimes