I have been taking at look at the UK’s selfbuild VAT reclaim figures. These are a key statistic, used to measure the size and the health of the selfbuild market where, uniquely in Europe, new homebuilding is zero-rated for VAT purposes. What I have managed to glean from the Revenue & Customs are figures for DIY VAT reclaims from March 2008 to August 2010.
There were 11,115 claims processed in YE Apr 2008, 10,067 in YE Apr 2009, and 3,675 in the first five months of this current tax year. Extrapolated forward, that suggest a yearly total of around 9,000 for YE Apr 2011. Whilst the number of selfbuild reclaims is currently falling by about 10% a year, the average payout is rising from £7,800 (2008) to £8,750 (2010 to date).
How do these figures compare with the past? The last time I did this exercise, in Aug 2007 (at the end of the housing boom), the average number of reclaims had been between 10,000 and 12,000 for more than ten years. The size of reclaim had grown from £4,000 in the 90s to £6,500 in YE 2007.
So there is both good and bad news for selfbuild in these figures. The number of reclaims is in decline, though that's hardly surprising given the state of the property market generally — in fact, selfbuild has proven remarkably resilient. If this year's trend continues, then this will be the first year this century that the number of reclaims has fallen below 10,000. But the size of the market, measured by cash being spent, is holding up well. The total VAT payout in each of these years I have just looked at looks like it's going to be of the order of £85m.
What the figures reveal
Firstly, they don’t really tell you the size of the selfbuild market. The only people that make DIY reclaims are non-professionals who aren’t registered for VAT and who buy materials on their own account. Therefore there will be lots of selfbuilds that never appear in these figures. We have to guess how many more, but you won’t be far out if you were to add 30%-50% to these numbers.
On the other hand, people completing half-built homes (inc loft shell complexes) can also make DIY reclaims under this scheme, so there are some claims coming in that aren't really traditional selfbuild. But how many loft shell apartments are being sold at the moment?
What about the dramatic increase in the amount being spent? I can see two obvious reasons for this. Firstly,people are building larger homes (or maybe they are building a greater proportion of large ones and a smaller proportion of small ones). Secondly, selfbuilders specifying more upmarket materials, in line with housebuilding generally. Granite worktops, underfloor heating, hardwood floors, etc. Doesn't sound very recessionary, but it tallies with a greater number of larger homes. As mortgage finance has been difficult these past few years, there would seem to be a greater proportion of silver-grey selfbuilds. And that's hair colour I'm talking about, not cedar cladding.
If you want to know more about the DIY VAT reclaim scheme, the relevant page is here.