Renovation costs - is it really worth it?

[ManyMaybes]

With such high costs of renovating these days, do people still think it’s worth doing? And for anybody going ahead, do you think there’s any chance of adding the same value to the house after the work?

It seems that prices have become so deranged there is no way a house could be worth the purchase plus renovation costs, unless people are expecting to pay a massive premium for a high quality finish ‘done’ house when moving home.

Renovating a fairly normal sized house in London to a high standard could end up costing you easily somewhere between £500k and £1m (or more!). I struggle to see how this can be worth it anywhere apart from the most expensive areas of central London. Usually houses that need work aren’t that much cheaper than recently refurbished houses so you’d be at big risk of blowing the top off the ceiling price on the street as well…

We’ve been looking and viewed a few that clearly needed extensive renovation. One has been on the market for nearly two years, starting at £475 and down to £400 - we offered £360 but they were deeply offended. The other has been on 6 months and we offered £390, listed for £425.

Both clearly have that pandemic mindset when houses were being snapped up but it isn’t the case anymore. With the cost of renovation when we did the maths, to get them to a good standard we’d be pricing ourselves out of the local market. In the end we went for one that had been renovated last year for less than both of our offers!

@Madtomove I know people who have inherited 500k plus & have friends who were gifted a deposit at 21 which with the way house prices have gone has given them huge equity. My colleague sold her 800k flat to a parent buying it for his daughter, & apparently it was the 3rd flat on the street to be sold in those circumstances.

V interesting @frankgu . I know my generation (mid 40s) got houses when they were ‘cheap’ (still 700k!! For a scruffy area 15 years ago!) and they’ve more than doubled in that time but now that we are thinking of moving up, we are competing for baby boomers houses with millennials who’ve been given just about the whole whack. Fair play to them! But I do think the inter generational unfairness is overplayed by those who have property owning parents in the south east!

I'm not sure, if you're young & in the SE or not I think it's sucks that whether your parents owned/can help you is more important than your salary for many.

Definitely: salaries have not kept pace with property prices thanks to a decade of ‘cheap money’. Just kicking myself that we were such nerds about paying off the mortgage rather than leveraging! Could be far worse positions to be in though like being at the mercy of landlords.

This is very true, when it come to renovations spending more money dosnt necessarily mean better quality/ finish.

People always use very emotive language when it comes to property.

greed is a character flaw. The owners of this home wanted a certain price. Maybe they made a poor decision - buts is just a personal decision. It doesn’t make anyone greedy to want the best price for an asset they own.

We bought a doer upper, not because we particularly wanted to do it up but because we couldn't afford one that was 'done'. We are now in limbo as we can't decide whether we should just do some basic cosmetic work to make it more to our taste or a proper renovation. The cost of work is excessive and when I think what that money could do for our kids one day... Uni costs/house deposits/holidays, it feels such a huge waste to spend on fancy kitchens and extensions and new fireplaces etc.
It doesn't help that our son is desperate for us to do nothing to the house. He gets really stressed at the prospect of builders coming in, so now I'm wondering if we will always remain in a doer upper!

I think BOMAD is unlikely to stretch to such sums for many people, unless your parents are extremely wealthy. I get the impression it’s more for first flats and things but I guess some people have a flat bought outright - which could be a deposit on a bigger house…

There are also a lot of people that earn a lot of money, so I guess that contributes to some of these projects. I think it’s mostly inheritance though - hundreds of thousands of pounds out of the blue, which is pretty much what you need for these types of projects.

@Inadvertentlyspring I completely agree with you

In that a huge amount of property in the country needs gutting - new plaster/ wiring/ windows and maybe even drains. Add an extension and you may be spending the same amount on renovation as buying and it may take up to a year, also you will need somewhere else to live and to be lucky enough to find tradesmen to work with you and aware if how much that might cost, with contingencies. It will also take over your life. The days of flipping for a quick profit are over I think but there is such little quality stock around that it is quite likely the only way to get the house you want. It's a once in a lifetime job for most at that scale and needs to be done early enough in that life time to be enjoyed and paid for. Absolutely not for the fainthearted or unaware in relation to property. Harsh times and not the fault of greed, huge margins aren't there and people don't have to sell their main asset for any less than they want, if it doesn't sell its on them. Things shouldn't be as hard as this bit they are at the moment unfortunately and I can't see things changing long term. Key message is maintaining property is crucial, don't let things get into disrepair if you can at all help it and be mindful of the slow slide into disrepair

I guess it depends on your motivation and reasons behind the renovation. We bought ours for £500k in 2020 just before it went bonkers. We've spent £250K on it (extension, new kitchen and bathroom, decorated throughout, new roof). Its probably worth £750K now, maybe a little more but it doesnt matter to us as its our forever home and we dont need to make money on it, we needed a home we loved for the rest of our lives.

We bought a renovation last year in London. We don’t plan to flip it but hopefully it should make some money if we were to sell in the next 5-10 years.

However we don’t plan to spend nearly as much as some of the sums suggested. We will do a lot of it ourselves and may eventually turn a conservatory into a kitchen extension but there’s no rush for that.

Your point is excellent, and you are absolutely correct in your thinking.

The key factor to consider is the nature of the renovation you have in mind.

If it involves a straightforward renovation where your intention is to incorporate built-in units that will add value to the property even after you've moved out, you can save a significant amount of money by undertaking the project yourself. By this, I don't mean physically cutting the pieces of wood yourself, but rather exploring companies that charge you solely for the unit parts, allowing you to assemble them independently. For instance, in my own house, we are following this approach to save on the costs of hiring a fitter or carpenter. We opted for a company called Jali, where you can design your units online, receive them flat-packed, and assemble them yourself. I have attached a picture showcasing the final outcome.

Several carpenters and fitters quoted me £5000 for the alcove shelving and cupboard project. However, by choosing this company, it cost me less than £800! Consequently, I view this as adding £5000 worth of value to my home while only spending £800, as I painted and assembled it on my own.

Now, if you are considering a larger renovation or even an extension, I would still encourage you not to shy away from doing it yourself. However, in such cases, it may be prudent to have a professional alongside you. Nonetheless, you can always offer your labour on the project to avoid the expense of hiring additional workers.

I hope this information proves helpful to you!

I know several people doing big renovations all costing serious money. None of them are in fancy houses just all 3 beds houses in normal suburban estates BUT all the people doing them love where they are so are now in the position to create the house they always wanted and they are doing it. No one plans to leave so no one is too bothered about house value.

We’re in London and having plans drawn up for a side return and loft conversion. House is a standard Victorian end of terrace. We have about £550k equity (60%) and budgeting £300k for the work which will almost double our mortgage.

However we love the location and in particular the schools (eldest DC only in reception) so have no plans to move any time soon. We need more space in the house and no other houses in the area have had the work done so we don’t really have an option.

It’s infuriating that we could have saved probably hundreds of thousands in lower building costs and interest rates if we’d done this a few years ago but it is what it is.

We aren't in the UK but we have done a large renovation on our house, spending half as much again as the original purchase price. However, we've done this over a period of about five years, and in that time house prices have gone way up in our area, well beyond our purchase price plus the cost of renovations. My husband is an architect so the renovations have been done beautifully, but they were also done with an eye to our comfort and time in the house as we have no plans to move - however, our children will have a good inheritance from what we've done.

I think in the end it's time that adds value. I wouldn't spend a lot on 'improvements' to a house I planned to sell soon, beyond making sure the paintwork was pleasant, in good condition and fairly neutral, and making the garden tidy and easily maintained. Your taste may not be somebody else's taste.

That's not a reno. That's a 'needs updating'.

I doubt a kitchen that costs 100K will ever make its costs back on the house sale.
Being realistic about it, if a builder isn't competing with you to buy a reno house, then it's very doubtful you'd make any money on it by renovating it to sell, unless you do a hell of lot of it yourself and have seven friendly cousins all in different trades who will get your materials at trade rates for you, and work for you for free on weekends.
Reasons for buying one:

1. You need more space than you can otherwise afford at this point, but are mentally and practically able to live in a rough-and-ready environment and will be able to afford the renovations in due course, and plan to do a lot yourself along the way. You need to know what you're doing about the practical stuff like damp, roofs, drains, etc. an to have costed it and added contingencies (about 2x the estimates is usually a reasonable amount).
2. You like things done properly/to your own taste and see no point paying extra for a superficially immaculate house and having to pay to undo other people's bodges/horrible wallpaper and grey everythings (and it still helps if you plan to do a lot yourself). You still need to be able to live in a tip and know what you're doing, see 1) [ this is us]

3.You want the plot and location and you're made of money and don't care how much it costs.

Reasons for not buying one

1. you only have enough money for the bare estimates of the costs

2. your'e someone who has no self-control and gets dragged into greater and greater expense because you have to have everything fashionable however great the cost, unless you are a 3. above.

3. you have zero or only superficial experience of DIY unless you are a 3. above

4. you think you can make money out of doing a house up [unless you are a foul sort of cowboy type who does the cheapest cover-up bodge job imaginable and have the skills to cover that up from a surveyor].

@BlueMongoose I like your categories. We are pretty much a 2 but it's complicated as drain issues/ layout and plot issues in our current house needed to be addressed to make it work. There was also nothing like what we wanted in the area where houses often sell off market. It has been relentless as we both work and grew up in families that make their living through physical property one way or another. In some locations its the only way to get the house you want. You might break even on day one but you won't make money. You will hopefully have a fixed house that suits you completely afterwards with no surprises. I would be really sad to leave our house and won't for decades now. I would never do a big renovation also. One thing that surprises me is how much people expect costs to be fixed and the end result always to be what they want. Maybe I have seen too much but I often expect it to go wrong. Even with the best planned work the weather alone can derail. I don't think the risk of a renovation is considered enough sometimes as a factor. This year materials have continued to increase but at a sightly more manageable rate, stock can still be tricky but not as much as it has been, trades OK availability wise but still not at all great. If there was another boom in demand for renovation- unlikely I think - it would get tricker still IMO

Manymaybes

you are spot on, renovations in london are close to 1m once you factor vat and lots of professionals fees for architects, surveyors… many architects work on percentages of 10% or more.

i am telling you this by a painful experience renovating and kitchen and loft extension, in london prime. Not even in prime location you get your money back. You might get the end result that you want (that wasn’t my case, but that is another story) but financially you will be making a loss if you were going to sell strait away. As a long term investment we don’t know how prices are going to evolve in the future so is a big risk to take.

prices for renovations are absolutely insane at the moment. And money speaking only is absolutely not worthy

i completely agree, when we started our big renovation we knew that we wouldn’t get the money back, although we didn’t expect to loose so much (on paper).
that the result is not we expected it’s a long story for another threat.
the building sector it’s very difficult at the moment, labour cost are absolutely stratospheric! Plus all other professionals around are also increasing their prices( architects, structural engineers, all sort of surveyors…)

in my area of prime sw london. There was a lot of activity 2021/2023 but as this projects are finishing there is barely any project starting now, and the few how start are of a much smaller scale than in previous years. I am glad to see this. Would I have been better informed two years ago I would have done it.