A new report has shown that while demand for refurbishment properties is particularly strong in rural counties, the cost of carrying out renovation works is largely unviable, even when government grants are obtained.
The Real Cost of Renovation Report from the Society of Chartered Surveyors of Ireland (SCSI) analysed 20 case studies from across Ireland, and ultimately found that only 25% of these were financially viable.
It states that while demand for renovation properties is generally weak, it is most evident in counties that have a stronger rural influence, although refurbishments are often less financially feasible in these regions.
Carrying out refurbishment works on an urban-centred property is generally more viable, the value of the property increases and absorbs the associated costs due to the higher number of resources close by.
Government grants for renovation
The SCSI report included the government’s most recent vacant property refurbishment grant which is known as ‘Croí Cónaithe’ in its assessment.
According to the report, out of the 20 case studies analysed for the study, 13 are most likely to be purchased by owners who plan to occupy the dwelling themselves.
However, all of these remained unviable even when the owners drew down a Croí Cónaithe grant of €50,000.
Furthermore, only one property was deemed to be financially viable when a €50,000 Croí Cónaithe grant and €21,500 Sustainable Energy Authority of Ireland (SEAI) grant were applied.
The report states that if the Croí Cónaithe grant was increased to €100,000, three additional properties would become financially viable.
Renovation costs
Of the 13 case studies that are set to be purchased for living in, the refurbishment costs ranged from €161,477 on a 79m2, three-bed house in Askeaton, Co. Limerick, to €605,410 for a 140m2, two-bed home in Beara, Co. Cork, excluding VAT.
The house in Co. Limerick was worth €40,000 before the works were completed, which increased to €140,000 after.
However, because the total refurbishment cost came to €161,477, the project was not financially viable as it left the owners with a loss of -€21,477.
The most expensive renovation was also not financially feasible as the property was initially worth €230,000, which rose to €450,000.
This means the owners were left with a loss of -€155,410.
Conclusions
Conclusions from the report state that while these government incentives to entice increased renovation of property are positive, they are still not enough.
“[It is] the views of those who provide specialist advice and support to buyers of these units highlight that the current incentives and supports in place are not at a satisfactory level to make a meaningful difference to the current levels of vacant stock,” it said.
As a result, the renovation of vacant and derelict property “can be an unattractive proposition for many aspiring owners” in comparison to the purchase of a new build or a ‘ready-to-go’ secondhand dwelling.
“The findings also concluded that prospective purchasers are more inclined to purchase new homes to avail of the various government supports such as the ‘Help to Buy’ and ‘First Home Scheme’ supports which are available to first time buyers.”
There are also a number of green finance offers which can offer lower interest rates that are not available to owners looking to renovate units as their principal private residence.