The Rising Cost of Renovation: Is a Fixer-Upper Still a Viable Path to Homeownership?

Once upon a time, a “project” home offered an affordable route to homeownership. But with soaring renovation costs, unpredictable timelines, and limited first-time buyer grants, many are questioning whether buying a fixer-upper is now financially unwise. Dublin-based quantity surveyor Shay Lally, founder of Houses to Restore and RENEW, has assessed over 1,000 properties needing renovation and personally overseen more than 100 renovation projects. He confirms that fixer-uppers are becoming increasingly expensive.

The Affordability Gap

According to a recent poll conducted by Shay Lally among his 70,000 Instagram followers, 75% believe that fixer-uppers have moved beyond the reach of first-time buyers. Even with available grants for insulation, doors, and windows for second-hand homes, and up to €70,000 for vacant and derelict properties, the potential for unexpected costs can quickly turn a renovation into a financial burden.

Hidden Costs and Comprehensive Assessments

The common advice to “buy the worst house on the best street” can be risky without a thorough pre-purchase assessment. Buyers often overlook hidden issues like asbestos removal, clay drain replacement, dry rot, or woodworm, which can significantly inflate costs. A standard mortgage survey typically provides only a “surface-level check” or visual inspection, failing to identify these underlying problems.

Lally recently encountered woodworm in an attic and dry rot in floor joists, findings that triggered substantial additional expenses. Replacing some joists could cost €1,500, but extensive damage might necessitate a complete replacement with a new concrete slab and underfloor heating, potentially exceeding €15,000 depending on the house size.

Common Renovation Expenses

Extending kitchen, utility, and conservatory areas can also be costly. Knocking down walls, removing rubble, and installing steel beams for load-bearing support can easily reach €15,000, before accounting for roofing, windows, wiring, and plumbing. A structural engineer’s certification for compliance can add another €1,500 or more.

The Value of a Quantity Surveyor

Lally advises engaging a quantity surveyor with residential experience before signing any contracts. The cost ranges from €750 to €1,500. A surveyor can help buyers realistically assess their budget, identify potential compromises, or even determine if the renovation is financially feasible.

Financing a Renovation

Martina Hennessy, chief executive of Doddl.ie, explains that renovation funds can be included in the initial mortgage drawdown, or secured after living in the property and borrowing against increased value. Buyers can potentially borrow up to 90% of the post-renovation value, subject to valuation, with a detailed breakdown of renovation costs and an estimated post-works valuation.

Mortgage funds are typically released in stages, contingent on invoices for non-structural work and certifications from surveyors, engineers, or architects for structural work. Lenders often require a 10% contingency fund in addition to the standard 10% deposit.

For example, a €400,000 house requiring €100,000 in renovations would necessitate a €50,000 deposit plus a €10,000 contingency fund before a bank will proceed. This additional cash requirement can be a significant barrier for first-time buyers.

Potential Delays and Complications

Staged fund releases can cause delays if the bank’s drawdown is not timely, potentially leading contractors to halt work due to non-payment. A shortage of construction workers and tradespeople can further extend timelines and increase costs, including rent and storage expenses. The availability of skilled labor is a major concern for renovators.

Energy Ratings and Mortgage Rates

Fixer-uppers often have lower Building Energy Ratings (BER), resulting in higher mortgage rates. Borrowing for a C-rated or lower home can incur an extra €136 per month, or almost €4,900 over three years, compared to an A-rated home, based on a €352,111 mortgage with a 3.2% fixed rate.

Limited Grants for First-Time Buyers

Currently, most first-time buyer grants are limited to new builds. The Help to Buy scheme offers a tax refund of up to €30,000, and the First Home Scheme provides shared equity of up to 30% of the purchase price. Buyers of fixer-uppers do not have access to these benefits.

While a €50,000 vacant property grant (increasing to €70,000 for derelict properties) is available, it’s open to all buyers and is paid upon completion of work, potentially creating cash flow issues. Lally notes that some buyers factor the grant into the purchase price, effectively benefiting the seller rather than the renovator.

Advantages of Buying a Fixer-Upper

Despite the challenges, fixer-uppers often offer advantages, including prime locations with better access to work, schools, and public transport. They also present greater potential for adding value and customization compared to new builds, and are often located in established neighborhoods.

Second-hand homes in move-in condition are in high demand, commanding a premium price. Many buyers are wary of current construction and renovation costs, preferring the certainty of a turnkey property.

Conclusion

The path to homeownership through renovation is becoming increasingly complex and expensive. Barriers such as cost, labor shortages, limited grants, and less favorable mortgage rates are squeezing options for first-time buyers. Those with larger deposits and access to skilled tradespeople are best positioned to navigate the challenges of a fixer-upper, but even then, careful planning and professional advice are essential.