Buying a property that needs some work is often seen as a great way to secure a bargain.
But aspiring renovators may want to consider new research which suggests it will usually end up costing more in the long run.
While buying a fixer-upper can be a cost-effective way of climbing the property ladder, the sheer cost of bringing such a home up to standard will often see homebuyers pay more overall.
The research by the estate agent Benham and Reeves looked at the current cost of purchasing a property in need of modernisation, and how those prices compare to the rest of the market.
The fixer-upper discount: Those buying in North East pay a 10.8% premium for a modernised home, while in London there is just a 4.4% difference
It found that although unmodernised properties are typically 4.5 per cent cheaper than similar modernised homes in the same area, the typical renovation costs outweigh the discount.
The average modernised home in England costs £374,000, whereas the typical unmodernised home costs £358,000, according to the research.
The data is based on listings rather than sold prices, and skews towards the larger homes that are typically taken on as renovations – which accounts for this figure being higher than the Office for National Statistics’ latest average of £278,000.
Unmodernised properties are those with very dated decorative schemes, and typically have kitchens and bathrooms that have not been updated for several decades.
The average cost of bringing an unmodernised property up to modern standards requires an average budget equal to 15.8 per cent of the property’s original value, according to the research.
On the average unmodernised home, that’s £56,569, meaning homebuyers will eventually fork out a total of £414,604 to get their fixer-upper up to scratch – £40,552 more than the cost of buying a modernised property outright.
Worth it? The discounts that homebuyers get when purchasing fixer uppers is typically outweighed by the cost of renovating, according to the research
Marc von Grundherr, director of Benham and Reeves, said: ‘A project property can be a great option for those struggling to climb the property ladder, as it often presents the chance to buy a larger home, or a home in an area they may not otherwise be able to afford.
‘For many homebuyers, the romantic notion of working long into the night to create their perfect family home also carries a high level of appeal – but be careful what you wish for.
‘While you may have the best intentions, you could soon find that the reality of juggling everyday life with such a monumental task can take its toll.
‘Even the seemingly straightforward jobs drag on for longer than expected and cost more.
‘At some point you will no doubt find you inevitably need professional help and this can also scupper even the most well-planned budgets.’
The rising cost of home improvements
Those opting to purchase a fixer-upper could also face eye-watering bills, with the price of home improvements soaring over the past year.
The cost of carrying out home improvements is up 23.5 per cent according to online tradesperson directory Checkatrade’s latest figures.
|Job||Price increase||% increase|
|Painter / Decorator||+£284||+26%|
The pandemic, Brexit and global unrest, along with factors like rising labour costs and the ongoing raw materials shortage, have resulted in costs spiralling for Britain’s renovators.
The cost of certain jobs that are crucial to updating an unmodernised home has risen by even more, according to Checkatrade.
The cost of the average electrician job has risen by 34 per cent year-on-year, for example; insulation jobs have increased by 29 per cent; while decorators, builders and carpenters are all charging 26 per cent more than a year ago.
Mike Fairman, chief executive of Checkatrade said: ‘The cost of raw materials such as timber and copper continues to skyrocket.
‘In fact, prices are so volatile that many of our tradespeople are currently only keeping quotes valid for a few weeks at a time or even only quoting for labour with cost-plus materials on top.
‘There’s no sign of the current price hikes abating anytime soon, suggesting challenging times ahead.’
Is a fixer-upper worth the hassle?
The cost of renovating a property may be greater in the long run, but there will always be buyers that prefer a fixer-upper.
After all many people are keen to put their own stamp on the place they live, whilst DIY enthusiasts may be able to cut costs by doing some of the work themselves.
Iain McKenzie, chief executive of The Guild of Property Professionals says: ‘Opting for a property that needs work will be attractive for buyers looking to tailor it to their own taste, and for those who can’t afford a house already renovated to a high standard.’
Dream property: Some buyers like the idea of designing their own home despite the higher costs, as they can renovate it to their own exact specifications
There are also those who will deem the higher renovation costs as a price worth paying in order to buy their dream home, in the area where they want to live.
‘For most people, buying a property is a long-term investment and getting your foot on the ladder as soon as possible is key,’ adds McKenzie.
‘Buying a doer-upper might help you get the right amount of space in the right location, if you’re willing to put in a bit more work.’
The rising costs have not dampened appetites for home improvements according to Checkatrade, with searches for tradespeople up 23.3 per cent year-on-year.
However, those that choose to renovate need to seriously consider the practicalities of taking on a fixer-upper.
If you’re planning to live in the property whilst the work is being carried out, it will mean living in a building site for weeks or months.
You’ll also have to get quotes and book in the relevant tradespeople to carry out the work.
You probably won’t be able to start this process until you are living in the property, and with tradespeople under increased demand at the moment, they’re unlikely to be available immediately.
Waiting game: Those buying a fixer-upper will need to be prepared to live in a building site for a period of time while they wait for the project to be completed
Cory Askew, head of sales at Chestertons says: ‘Depending on the extent of the required work, buyers may be facing a rough few weeks or months of living on a construction site.
‘With many of us nowadays working remotely, this could cause major disruption to your current standard of living.’
It is also crucial to understand the true extent of the work that needs doing, as this is something buyers often underestimate.
Every property will be different, but updating an unmodernised home may involve changes you may not have even thought of. For example, the electrics or the plumbing may require a complete overhaul.
Askew says: ‘Buyers need to take into consideration the potential of larger jobs that might not be visible at first sight.
‘If the property has structural damage or if the roof is required to be fixed, costs can quickly spiral out of control.
‘It’s therefore important to conduct a thorough survey of the property before finalising the sale.
‘Architects, design and planning consultants costs can also very quickly add up; not to mention the value of time taken up in the administrative hurdles required for major works.’
What about the potential to add value?
Homeowners often think that any improvements they make will ultimately increase the value of their home.
Although this is often true, seeing a return on your investment when you come to sell is far from guaranteed.
Look to the future: Focusing on features that appeal to buyers, such as energy improvements, helps renovators make more money when they come to sell according to Chestertons
Often the simplest improvements can make a difference when selling. For example, repainting the walls, or simply tidying the house will make a good first impression to prospective buyers.
However, to add real value, homeowners typically need to either increase the size of the property or add features that buyers want.
‘Increasing the square footage of your home is a great idea and, for many buyers, extensions remain a popular choice in order to add value to a property,’ says Askew.
‘We are also seeing a surge in demand for energy efficient homes.
‘Incorporating greener energy sources as well as good quality insulation material is therefore not only a good investment for your own comfort and wallet, but could eventually increase your property’s resale value.
‘Carrying out a cost effective renovation is a delicate balance,’ adds Askey. ‘It is essential that all costs and contingencies are considered to avoid ending up in a worse position than where you started.’
For homeowners looking to add value by embarking on extensions or loft conversions, it is also wise to consider whether such an improvement would appeal to the type of buyers in their area.
For example, if there are lots of young first time buyers and few large families, the last thing you want to do is turn your three-bedroom house into a five-bedroom family home as buyers just won’t have the budget for it.
Reducing renovation costs: top tips
1. Get at least three quotes. This can help make sure you’re not overpaying – but be wary of any cost which seems particularly low.
2. Order materials early. Price rises are showing no sign of abating, so purchasing materials early could work in your favour.
3. Manage resource and time. If you’re planning a big project, pay careful attention to how trades are phased to avoid multiple call-out charges.
4. Reuse materials. Consider whether you could salvage timber, pipes or other materials which may otherwise have gone into a skip.