End of the ‘doer-upper’: rising cost of renovations cripples demand for ageing homes
IRISH property prices have caught the builders blues with a sudden surge in renovation costs seeing the values of older homes falling relative to other properties.
A shortage of builders and a move by many operators into bigger commercial construction work while quoting high prices for domestic work by way of discouragement has led to recently acquired doer-uppers being returned to market as they cost more to restore than their owners expected.
Estate agents in city postcodes with high numbers of executor sales or with large numbers of period properties are now reporting a real impact on the demand for older homes in need of work.
For example in Dublin 12, prices of bungalows have fallen from €540,000 last year to €460,000 today.
The hard impact on local property prices is among the findings of ‘How Much Is Your House Worth? 2019’, the Irish Independent’s annual survey of home values by locality and property type published today.
Estate agents in Dublin 3 report cases of recent buyers of older homes bringing them back to market straight away after being deterred from renovation by inflated quotes from builders. Conor Gallagher, of Gallagher Quigley, added: “At least a dozen times last year I encountered a situation where someone had purchased a property in need of refurbishment and had their architect go in for planning, only to discover by the
Many homes have been put back on the market
time that the planning came through, the cost of the work was being priced at up to 50pc more than estimated.”
According to a study by Linesight conducted three months ago, the cost of building a family home has risen by 7.5pc to €161,000.
Other key findings include the extent of disruption now caused by the timing of loans under exceptions to Central Bank mortgage lending limits. Banks can issue 20pc of mortgages in a year which are exempt from the strict income-to-value ceilings and these tend to be front-loaded into the beginning of the year.
The result has been a inflationary frenzy of purchasing early in the year followed by a deflationary lull in the second part of the year. Finally in November and December activity has picked up again with buyers looking to take advantage of the fresh issue of exceptions from January.
The front-loading meant that some markets experienced prices rising, falling and rising again all in the same year. In the case of Dublin 22, prices rose by 9pc in the first half of the year and fell by 4pc between June and Christmas.
While prices rose in Dublin 12 early in the year, they fell back to leave prices down 5pc by year’s end.
Generally house prices rose by an average of 5pc through the year.
The study shows that most locations had static or falling prices for the first time since the crash, albeit confined generally to more expensive housing types. In the same locations, cheaper homes priced within mortgage limits for average earners generally showed strong price rises.
Areas which showed the highest price growth overall include Laois, with an average price of €165,000, up 9pc, Carlow (up 9pc), Cavan (up 8pc), Louth (up 8pc), and Westmeath (up 8pc), demonstrating that affordability has made this outer band of counties Dublin’s new commuter belt.
In Dublin the highest price rises were also in the cheapest locations, with Dublin 10 up 8pc (average price €250,000), Dublin 17 up 10pc (average price €325,000) and Dublin 24 up 8pc (average price €350,000). More expensive suburbs tended to rise at a slower pace with Dublin 4 and South County up 3pc overall (average prices €570,000 and €773,000 respectively).
Other findings include a softening of apartment price inflation. Investors, who usually make up around 20pc of purchases in a normal market, were conspicuous by their absence. At the same time those who already owned properties are pushing forth to sell them. Almost all markets covered reported high sales of investment properties and landlords leaving the market, despite the highest rents in memory. Agents said departing investors blamed rent caps, taxation and general hostile conditions.
In Galway City, O’Donnellan Joyce reports that there can now by as much as a 20pc difference in value between iden- tical homes, one empty and one with a long-term tenant.
The highest price rises overall were in Kilkenny (22pc), Longford (16pc) and Tipperary North (13pc), with the Mayo (-1pc), Donegal (-2pc) and Dublin 12 (-5pc) being the three to see price falls in the last 12 months. Meantime, where new homes were constructed, adjoining second hand home values suffered more than in the past.
Agents report buyers were persuaded by cheap to heat A-rated properties as well as the effective €20,000 discount under Help to Buy.
‘How Much Is Your House Worth? 2019’ analyses the current values of 37 different types of homes in 64 micro markets, with the help of more than 70 local valuation experts.