Renovation costs - wait it out or bite the bullet?

[Polpetto]

Crystal ball stuff but what do people think is going to happen with renovation costs?

we’re in London and bought a fixer upper 5 years ago. Planned to remortgage to do side return and loft this year/next but now is clearly not the time with rocketing labour and materials costs. We need to do at least the loft in the next couple of years as need more bedroom space but would ideally get it all done at once to save disruption. I’ve assumed prices will be double what we were expecting pre-covid (min £300k as opposed to £150).

Should we bite the bullet now in the expectation things can only get worse or wait it out?

Well, I’m maybe not the best person to ask but I would say to do it now if you need the work doing and can afford it.

We held off doing our extension for various reasons pre-Covid (dealing with a bereavement, house clearance and pregnancy/new baby). It will now cost us double what it would have done if we’d pushed ahead in 2019. Loft conversion costs went up by 25% between 2019 and 2020 alone.

Ironically, if we’d pushed ahead with our single storey extension in 2019, we would have been able to remortgage this year, combined with a small inheritance, to do our loft conversion this year. As it is, we can only just afford the single storey extension with about 20% of the budget coming from a remortgage.

Prices never drop, in my experience - they may stabilise but I can’t see them going down. Do what you can afford now.

Extension costs are made up of building materials and labour. I don't think building materials will go down in price, but I do think labour will. There's expected to be a recession in the next year or two, and I think labour costs will go back to pre-pandemic levels once this happens, as demand for work will decrease. Personally I'd wait.

I would get some quotes so you are not working on assumptions.

Labour costs may come down in a recession but then you will also have the risk of building firms going bust to deal with. Also remortgage rates are going up so doing it now may be more cost effective.
,
Another option, if house prices come down, is to use the money you would have invested in an extension to trade up.