Do Modular Homes Hold Their Value?

Modular homes in the UK are becoming more and more popular with the value of this market expected to double by 2033. One of the main ones is that the price you pay is often lower than that of a traditional build.

Investing in anything comes with risks, so you need to know whether the value of this asset is going to stay constant or even go up.

In this article, we take an in-depth look at more of what you need to know when putting your money into a modular home.

How is a modular home different from brick-and-mortar houses?

A lot of the confusion around the value of modular homes in the UK centres around the fact that a lot of people aren’t familiar with them. Some assume that they’re just temporary structures, with a value that reflects that fact. They’re not, which is why people need a mortgage to buy one.

In reality, they very much represent permanent housing - it’s just that they’re constructed differently. It’s why modular homes generally hold their value in much the same way as traditional properties do.

Here are a few helpful things to know:

• They’re built before delivery - Most of the work happens in a factory long before anything arrives on site. By the time the sections are delivered, the bulk of the home is already done and just needs putting together.
• They’re permanently fixed to foundations - A lot of people confuse modular homes with mobile homes. They're not the same thing. Once it's down, it's bolted to permanent foundations just like any house.
• They’re subject to the same regulations - There's no special set of rules for modular homes that lets them cut corners. They go through the same building regs as everything else.
• They’re quicker to put up - Because so much is already done before it arrives, the on-site phase is usually a lot shorter than a traditional build.

What affects the resale value of a modular home?

When it comes to selling any property selling any property, the same factors tend to matter: location, build quality and whether there's actual demand for it in that area. Selling a modular home is no different, but there are a few additional things that buyers and lenders need to consider.

As such, if you're planning to sell at some point, understanding what buyers tend to scrutinise means you can get ahead of any issues rather than dealing with them mid-sale.

The main things to know:

• Lenders aren’t always on board - Most lenders are fine with modular homes these days, but some still aren't. If fewer buyers can get a mortgage on the property vs traditional homes, it could affect the resale price.
• Missing warranties can affect things - A warranty from someone like NHBC tells lenders and buyers the property was built properly. Without one, you'll face more questions and more resistance from both.
• Plot or access issues - If your land has an awkward layout or nowhere obvious to park, it can put buyers off, regardless of how good the home itself is. As such, it's worth being realistic about how good access is.
• Planning issues - Subdivided land or murky planning permissions can grind a sale to a halt. Buyers' solicitors will pick up on anything that isn't straightforward, so it's better to get ahead of it.
• Buyer familiarity - Plenty of people still don't know much about modular construction, and unfamiliarity can breed hesitation. It's less of an issue than it used to be, but it can still affect the asking price.

Most of these can be dealt with early if you know what to look for, but if you're still weighing up whether a modular home is the right move, our guide on the wisdom of buying a Modular Construction Home goes into more detail.

Building a modular home as an investment

For some buyers, building a modular home isn't just somewhere to live. Because the build process is quicker than a traditional construction project, they're sometimes used as a property investment, when someone already owns land with planning permission and wants to do something useful with it.

That said, here are a few important things worth bearing in mind when taking this particular route:

Planning permission is still required

The home being built off-site doesn't change anything on the planning side. The land still needs residential permission before anything can be installed, so you’ll need to request it ahead of time.

It’s a faster self-build plot option

If you want to build on a plot without overseeing a lengthy construction project, modular is a practical alternative that gets you to the finish line faster. It can take a matter of weeks, not months.

It can release the value of spare land

Got a section of garden land with planning approval that’s sitting largely unused? Buying a modular home is a great way to put it to work and either sell for a big lump sum or some residual rental home income.

The land and home can be sold as a package

Rather than offloading an empty plot, some investors install a modular home and sell the finished property. It's a more appealing proposition for most buyers.

For landowners thinking about their options, there's a reasonable case that installing a modular home and selling the finished property will get you more than selling the land alone.

Buying or selling a modular home? Get the right legal support

Modular homes can hold their value just as well as traditional properties, but sales do tend to involve a few extra checks regarding planning permission, warranties and whether the buyer's lender is happy with the construction method.

At SAM Conveyancing, we handle all kinds of property transactions, including modular and non-traditional homes.

Our RICS surveyors have plenty of experience inspecting modular buildings.

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