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Author: Internal Customer Services Agent
The true cost of renovation projects
Many people in the UK struggle to get a firm foot on the property market and as such find themselves looking for less costly and therefore more feasible options to consider. One such option which is being considered year on year is the undertaking of renovation based property purchases. The initial purchase price of such properties are comparably lower than that of ‘completed’ properties due to the fact the purchase is made with the knowledge funds will subsequently need to be spent on improvements. Often as a result of this increasing trend Britons are finding themselves effectively living on a ‘building site’ for considerable periods of time. Whilst the initial cost of such properties can be smaller, homes needing work can end up being more expense for home buyers when the full extent of work required is not considered and as such, some struggle to find the funds required to complete such a task. According to research by confused.com a staggering 45% of Britons later found that such renovation properties costed more than the amount which had originally been budgeted for. Clearly though even with this fact in mind, the lure of renovation properties continues to increase with this recent survey concluding that 35% of people asked brought a property needing repair as the only way to secure a place on the property ladder. Today we will be investigating this consumer habit in greater detail to understand exactly what consumers in this position are realistically facing.
Whilst it is true that in most locations in the UK that a renovation project will come in cheaper, as we have touched upon above, the true cost of the entire project can be misinterpreted by many. The research conducted by confused.com not only highlighted that over a third of those purchasing properties in this way later discovered that the total cost was much more than first thought but perhaps more shockingly 10% lived in such properties whilst in a state which was unfinished for a year. That said the average amount spent on a property requiring work was £152,792.00, which as reported by Halifax in January 2016 is in fact £44,000.00 below the average price of a UK house. Obviously this means for buyers in this position there is sizable funding available to renovate the property as required. Halifax’s research further suggested that an average of £33,000.00 was spent on such properties allowing for fair and worthwhile profit margins upon completion. However it is true to say that it was also discovered that one in ten spent over £50,000.00 in these same circumstances. Clearly there is a fine line in ensuring the total cost of such property purchases are ultimately sensible and able to provide the end goal without going over on initial budgeting estimates. This is highlighted in this research with almost a third of those surveyed confirming they had exceeded their budget by sums of £5000.00, closing the profit window further still.
The reality is not everyone who purchases a property in need of renovation is able to fund the repairs which are needed. The survey compiling these findings found of the 2000 people questioned, 1000 were discovered to have purchased a property with the knowledge of development work being required and 8% of these admitted to not being able to afford to complete the work which was known to be needed. These findings come as it has been confirmed that property prices in the UK continue to rise year on year. The latest official figures show that prices increased by 6.7% last year, which in real terms means an increase of £18,000.00 taking the average price of a home in the UK to £288,000.00. For some time now experts have been warning that the ability to own a home is becoming increasingly difficult for many, especially those who are considered to be on lower incomes. It is because of this that buyers continue to be drawn to the potential that can be gained from renovation properties if managed effectively and within budgets set out. Where the cost of ‘doing up’ such homes exceeded the cost originally thought, 22% of consumers said they would never consider purchasing a property in such a manner ever again. That said the picture for renovating properties is not all doom and gloom. In fact nearly 1 in 5 homeowners say that the market value of their completed property ultimately exceeded the total cost of purchase and subsequent work required. To put this into clear and real terms, these same 1 in 5 reported end profits of between £25,000.00 and £50,000.00. Ultimately highlighting that if managed effectively, such projects can produce financial reward in the long term.