Can I really save money by living in a tiny home?

As house prices continue to rise, tiny homes are becoming more popular in the UK. Are these miniature houses really worth the investment? We take a look.

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Tiny homes have been popular in the US for years now. And while it took a little longer for the trend to catch on in the UK, over 8,000 new ones are built every year on this side of the ocean, according to The Switch.

There is no official definition of what constitutes a tiny house. According to Realtor.com, the accepted definition of a tiny home is one that measures under 400 square feet (37 square metres) but still includes all the comforts of a full-size home, including a bathroom and kitchen.

[top_pitch]

Are tiny homes legal in the UK?

The short answer is yes – as long as they comply with certain regulations.

Legally speaking, tiny homes are either considered caravans (if they have wheels) or a granny annexe if they’re set on the ground without a trailer. In either case, they’re legal in the UK and it’s perfectly fine for you to live in one.

Here comes the tricky part. If the tiny home, wheels or not, is in your back garden, you don’t need any kind of planning permission. It is considered an extra building. You will also not need to pay any added property tax for it.

On the other hand, if you buy or rent some land and place a non-movable tiny home there as your main residence, then you will need planning permission and will need to pay council tax for it.

There’s an exception: if you buy a piece of land and place your tiny home there but only use it as a vacation home, then you’ll pay no taxes. Council tax only applies if you reside in the home full-time.

Tiny houses placed on the same land as your main residence must be a maximum of 19.8m x 6.7m in other to be considered a caravan.

[middle_pitch]

How much does a tiny home cost?

Tiny homes cost a fraction of the price of regular-sized homes. Property prices rose by 7% in 2020 and are expected to rise nearly 20% in the next decade. Today, the average UK property will set you back £239,927.

The price of a tiny home depends on its size and design. For as little as £10,000 you can buy a bare one (just the shell). A fully-furnished one with all the fittings will cost £20,000 or more. For mobile tiny houses, this sometimes includes the trailer to move them.

If you have the know-how or are willing to learn, then you can build a tiny home for much less. When you buy one, much of what you’re paying for is labour. If you can do much or all of the construction yourself, then you can save 30% to 50% of the cost.

To start your search, check out Tiny Eco Homes, which sells custom-built road-legal tiny houses or Tiny House UK, which offers fully or partly-built houses. There are many other manufacturers online, most of which offer tiny homes that are fully customisable. That way, you can request exactly the features you want beforehand. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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