Whether you're trying to arrange finance or you're in a position to build using savings, it's vital to the success of your build that you ensure you have a reasonable grasp of how much it's going to cost to build the house you want, and that you have the financial resources to complete the build.

There are numerous magazines and on line guides to help you, but it's really important to understand the complexity of the design, the method of construction, the level of energy efficiency, the specification, the way you intend to contract the work out, the location, and the input from you, your family and/or friends on site, will all have a significant impact on the construction costs.

Getting started
The best way to get an idea of build costs is to speak with local builders, but you have to understand, contractors can only start to firm up their prices, once you have detailed drawings and a reasonably accurate specification. Clearly that’s not going to be an option when you still don’t own the land and particularly if there’s only Outline Planning Permission (OPP) on the plot.

In reality, you have to have a pretty firm idea of what you actually want to spend, so for most of us a conversation with a financial advisor would be essential before you get serious about buying the land.

If you’re employing a contractor to carry out most of the work the equity is not likely to be any more than 20% and could well be less – depending on the build costs. So you should expect the construction costs to be circa 40% or more of the end value, but allow a reasonable variance to give you wriggle room on the specification. Local estate agents should be able to give you a reasonable idea of the end value once you have at least some drawings.

Keeping things simple
Firstly start with old fashioned lists - a ‘must have’ list and a ‘wish’ list. The 'must have' list should be the 10 most important things to you and your family to make the whole exercise worthwhile. We can’t give you a list, it has to be your own but for most of us location would be pretty high up there. Perhaps number of bedrooms, energy efficiency, garage, room to expand, (for example developing the roof space in the future) so straight away you’re beginning to develop your specification. Once you have the fundamentals, you can start looking at costs, until you have your target list, you can’t.

Method of construction & the effect on build costs
So ignoring things like energy efficiency, and speed of build, we can give you some basic guidance. From our database of the most recent 868 self-build projects, we can extract the following information.

*Gross Internal Floor Area

In reality what does this tell us? Masonry will be the cheapest solution? Not necessarily, two big factors come into play;

• Most builders would prefer to build in masonry, so they tend to price a bit more competitively, and of course a lot of ‘self-builders’ are in the trade, so they have more chance of getting better rates from mates or family in the trade, than they will from a timber frame company.
• We’re ignoring energy efficiency.

The only thing it actually tells us with any certainty is that masonry and standard timber frame construction are far and away the most popular methods of construction for self builders and timber frame seems to work out at just under 3.5% more expensive (from our sample of projects) – and remember there’s likely to be a higher input from family and friends on a masonry build that there is on a timber frame dwelling, so even that is a bit misleading. Fundamentally there’s little overall difference between them.

However, for those of you looking to build ‘super insulated’ or perhaps Passivhaus standard dwellings, large format panel systems or maybe ICF, would arguably be the most cost effective way to go. You can build to passive standards using pretty much any method of construction, but if you want to keep within budget, be very careful which path you choose.

Don’t be mislead by the average GIFA either, the smallest project on the list was a masonry bungalow at just 42 sq m (452 sq ft). In Hertfordshire this cost just under £2,000 per sq m to build. The largest is a masonry house at 920 sq m (9,902 sq ft) on Teesside. This one only cost circa £1,100 per sq m to build. So don’t think the size of the dwelling will necessarily affect the cost per sq m, that’s why it’s risky to just rely on costing your project on that basis.

Design and effect on build costs
Obviously the local planning authority will have significant input on the design and scale of your planned development. Make sure you check what restrictions and conditions may be in place already, before you go too far down the land purchase road. There are some general rules you might want to consider.

• The reason commercial developers don’t build many bungalows is because they take up too much land & are generally expensive in terms of development costs, simply because the footprint is much larger for a single storey dwelling, and groundworks are much more expensive to undertake than the construction of intermediate floors under most circumstances.
• Full two storey houses are still more expensive than chalets, (1.5 or 1.75 storey houses), because you have more brickwork to build, whereas with a dormer bungalow, half the upper storey accommodation is in the roof space, but of course you tend to lose a bit of headroom with accommodation in the roof space... again depending on the design.
• Even if you want a bungalow, or a two storey house, get the roof void designed and built in such a way that it can be developed cost effectively in the future even if it’s by the next owner of the dwelling. But remember; if you’re designing for habitable accommodation on more than two floors the fire regulations will be different… it still adds significant value to the property whether your circumstances change and you need more space, or as and when you sell the house. You’ll need ‘warm roof’ insulation too, run a ring main & lighting circuit, and some tails to extend your central heating; you’ll pay a bit more, but it potentially gives you a great opportunity for future development very cost effectively.
• Think about room sizes too, it’s all very well having massive open spaces, but something has to hold up the upper floor or roof… have you just caused the engineers & builders a nightmare, for which you’ll end up paying?
• Is it a sloping site, depending on the degree of slope, you can easily increase your build costs by 10%+.
• Basements are great use of land, but because of the ground conditions in this country, they’re very costly to build on a ‘per sq m’ basis. It might stack up in the middle of London, but out of town, on a straightforward finance level… possibly not.

Method of contracting and effect on build costs
Again we’re into the wonderful world of variables, and you need to refer back to your ‘must-have’ list. If you’re lucky enough to have tradesmen in the family then use them if you can, even if you only know a couple of trades and they’re a ‘specialist’ they are still likely to know and work with other reliable tradesmen or women, so they might be able to help you keep the costs down to a degree, but remember, these people will have bills to pay too, and ultimately with the industry being as buoyant as it is at the moment, why should anyone come and work on your house for less money than can earn just down the road? Just because you have a drink with a brickie (for example) on the weekend, doesn’t mean he’s going to save you loads of money on your build, he’s just like the rest of us and will want to earn as much as he can.

Most established construction companies, in a position to take on a full build, will need to add management and administrative charges to their costs; they too have overheads, like any other business. You can take a chance on a very small builder (one man & his van), but his purchasing power is not likely to be that great, and if something goes seriously wrong, it’s unlikely you’ll have any comeback. Larger building companies (say building 4+ houses at a time), would be a good choice, (if they’re interested in doing a one-off), but by the time they’re that sort of size, they’re more likely to be developers for themselves and of course their OH&P will be even higher.

Keeping build costs down - or at least under control
When you first look at the site, have a good look around to see what’s nearby in terms of services and utilities. I’ve seen numerous quotes for £15,000+ just to get electricity to site. Try to find out where the nearest water main is; trenches to get water to site have to be quite deep (750mm), so costs will soon go up if the nearest water main is a good way away. Remember too that nearly all the utility providers take ages to do anything… get in touch early on.

Think about access too; that lovely garden plot down a narrow, windy lane with overhanging trees, might be fine for you in your car, but lots of deliveries are cheapest on large lorries, generally the bigger the lorry the cheaper the delivery cost, but if he can only get 200m away from site (or more), you’ll be hiring a telehandler and driver to get the goods on site… there goes any money you thought you’d saved.

Before things start on site, talk to the builder or specialist trades you’re looking to employ, there may be things you can organise or do on site that will save the tradesmen following on time and therefore you money. Particularly on an urban site where space is restricted; Can you get a load of bricks/blocks or perhaps even trusses delivered and stored a bit back on the site, (obviously out of the way), before the Groundworkers start digging trenches for foundations, services and drains? It will certainly save them time, but remember will also interfere with your planned cash flow.

Once you’ve decided on a budget, stick to it. If you have a bit of wriggle room on expenditure, up the specification on the things that will be there permanently, and will benefit you long term. Air-tightness & insulation will give you the biggest bang for your buck, as far as long term return on your investment goes. It’s all very well to have a £50,000 kitchen, but as and when you come to sell the house, the next owner will almost certainly rip it out and change it, but if you can show your energy bills are low, you will appeal to a much larger number of people.

Things like windows are another weakness – there are thousands of companies who will supply PVCu windows for example, and like most things, if you try, you’ll find someone who can offer it at a lower cost. But as with most things they’ll be cheap for a reason and they won’t perform as well from an energy or security point of view as the more expensive ones, or there will be a higher proportion of recycled plastic in the frames and within a short period of time they will look dull or faded… and you’ll be looking to change them, along with all the cost and disruption that can cause. Keep the specification up on things that are hard/expensive/disruptive to change or upgrade at a later date. Don’t get carried away with ‘image’ unless you can afford it, a £15 internal door blocks an opening just as well as a £250 door, so if the budget is tight, go for the cheaper one and upgrade at a later date when the pressure’s off. Who sees your bedroom doors apart from you anyway?

Generally, if you have the confidence and flexibility bearing in mind other demands on your time, the least expensive way to build is by organising as much as you can yourself, potentially buy the materials where you can save money, but don’t necessarily get bogged down with commodity items. If you’re going with a timber frame solution for example, go for a ‘supply & erect’ deal from the frame manufacturer, you will not pay VAT, and you will save the builder mark-up. Arguably the same with fenestration but get your windows as a ‘supply & fit’ deal, or you’ll pay VAT. However when it comes to cement, plasterboard, chipboard etc… everyone sells it, so there’s little or no additional discount to be had & if the builder makes 15 – 20% on it it’s probably not going to be a deal breaker as far as the project goes. The right sort of builder will be getting better buying terms than you’re likely to anyway. In effect if he’s buying on average at 10% less than you & puts a 20% mark up on, it’s actually only costing you 8% more, but A) you’ll have to fund the VAT through to beyond the end of the build if you buy materials yourself, and B) at least you’ve removed the risk of getting something wrong that was your responsibility to get on site, even if the delay or error wasn’t your fault. Having tradesmen or women standing about on site with nothing to do because a delivery you organised hasn’t turned up on site is very expensive… they will still want paying whether you like it or not. Mess them about too much and they’ll just walk off and go to another job.

If you are intending to buy your own materials, because you’ve negotiated a good deal from the merchants, remember you will have to fund the VAT until after you get your completion certificate; perhaps 12 months or more away.

Build in a healthy contingency. Remember if you’re arranging finance today, you’re likely to still be buying materials in perhaps 18 months’ time. Building materials tend to go up twice a year, in the spring and again in the autumn. So try to agree fixed prices on as much as you can. Due to various reasons, some timber and insulation products have risen by more than 20% over the last two and a half years. A few years ago there was a shortage of bricks, suddenly they were like gold dust… so agree a price, and reserve however many you need and if necessary pay a holding deposit.

Labour costs seem to continually creep up when the industry as a whole is buoyant… lots of trades are already earning £250 per day or more (of course this varies around the country too), so avoid agreeing to work being done on a ‘day rate’ if at all possible. Check what your builder charges as a day rate ideally before you contract with them, it’s a good measure of how expensive they’re likely to be overall.

Get yourself a duplicate or triplicate book. They don’t cost much, but if you’re having a discussion with someone on site about adding something, changing something (contract variations), write down what you have discussed or agreed and give them a copy there & then. They might not be able to give you a price straight away, but at least you’ll have some kind of record of the discussion and hopefully they will at least be able to give you an idea of how long it might take, and if you know the day rate, you can decide whether you think the alteration is good value. Significant variations should always be agreed with the boss, don’t rely on the guys on site to give you an accurate figure. Golden Rule; don’t make changes unless you really have to.

So once you’ve decided on your preferred method of construction, you have to try to research local contractors (you want to avoid travel time if possible), pick someone based in the same town or village if possible, local builders rely on work from local people, therefore they will want to preserve their reputation by doing a good job. Speak to Building Control if you don’t know any good local builders; they’re not likely to actually recommend anyone, for obvious reasons, but they might give you a steer as to “which contractors you should potentially be talking to”. Speak to the local Merchants, the same will apply; if they give a name or two to contact, whilst it’s no guarantee, at least you’ll know the builder pays his bills on time, no reputable Merchant would pass on a name of a company with money troubles.

Don’t pay deposits in advance of the building work starting unless it’s for something with a long lead time and is bespoke to your house… for example a timber frame, or perhaps windows. Most reputable contractors will have accounts with merchants, plant hire companies, hauliers and concrete suppliers, so there should be no need to pay the builder for things that he can put on account. He will have wages to pay, but say your groundworks take 4 – 6 weeks & there are three men on site… he’s not going to be paying them in advance, so why should you? At the very most, offer to cover their wages weekly in arrears, that said I would worry if my builder was that hard up he couldn’t pay his men.

Be honest with yourself about what you can actually take on and whether in reality it’s going to save you money. Most of us have a full time job, so how do you expect to project manage, when you’re at work? Yes you can arrange say weekly meetings with the builder, but if he needs a decision during the working day and you can’t answer the phone or get to site, how do you expect to deal with it? Will you really have enough time ‘evenings and weekends’ to progress the build at a reasonable pace & you’re not holding up hired in labour? It sounds great, but most of us have a family too… how mush ‘spare time’ do you really have?