Many vacant home refurbishments unviable unless grants rise – report
A new report has cast doubt on the financial viability of renovating many vacant or derelict properties, without a significant increase in Government grants being made available.
The study by the Society of Chartered Surveyors Ireland (SCSI) looked at 20 different case studies from around Ireland and found just a quarter were financially viable without the application of any grants.
When grants available through the Croí na Conaithe scheme and Sustainable Energy Authority of Ireland were factored in, just one more property became viable.
But the SCSI analysis found that when the maximum €50,000 Croí na Conaithe grant for refurbishing derelict vacant properties was doubled to €100,000, a further three more properties became viable.
Two others were within €5,000 of the threshold required to become viable, deemed to be the point where the original purchase and renovation costs are equivalent to the current market value of the refurbished property.
According to the SCSI, financial viability is a key requirement for homeowners or investors who are seeking a mortgage from a lender to pay for the renovation of a property.
“It’s clear current incentives and supports in place are not at a satisfactory level to make a meaningful difference to the current levels of vacant stock,” said Chartered Planning and Development Surveyor, Lisa Rocca, who co-authored the report.
“We have 13 residential type properties among our case studies and in a scenario where the Croí Cónaithe grant is increased to €100,000, the number which becomes viable doubles to eight, while two more are on the cusp of becoming viable, so it’s clear increasing the grants would have a major impact with regard to financial viability.”
The other seven properties included in the study were investor type.
The research found that the factors of location, size and condition were the critical ones that determined if a property was likely to be financially viable.
Across the 20 cases analysed, the cost of carrying out the refurbishment ranged from €161,000 to €605,000.
Hard costs, which include anything that are physically part of the new structure, were found to make up 87% of the total cost.
Soft costs, including architect, engineering and surveyor fees, comprise the balance.
Previous SCSI reports about the construction costs of new homes and apartments found the split was more even.
The study also includes the findings of a survey of over 400 chartered surveyors about the issues around renovations.
It found eight out of ten believe it is harder for borrowers to access funding for a renovation project due to the potentially higher risks involved and challenges accessing fixed funding upfront for a project.
“The lending process for those taking on renovation projects needs to be improved,” said Lisa Rocca.
“This could be done by lenders establishing a clear set of lending policies and guidance for prospective renovators.
“The SCSI is also recommending the establishment of a specialist-lender type initiative whereby funds are directed through lending partner agencies at preferential rates to support renovation projects.”
The SCSI said 41% of the survey respondents said they would like to see increased financial supports for those renovating.
But the SCSI said that rather than applying increased grants on a universal basis it would like to see a tailored approach with a feasibility grant included under Croí Cónaithe to help prospective purchasers assess the viability of a project.
“So, while additional grant bands should be established the level of grant funding for a project would be informed by the findings of the feasibility study,” Ms Rocca said.
Building regulations were also seen as a key impediment for those seeking to renovate properties, with planning rules seen as too restrictive by more than half of respondents.
It said 26% said they would like to see less red tape and a simplification of the regulations.
The SCSI also emphasised the need for a proper national register of vacant and derelict units.
A surveyor whose own project was part of the study has said he found a property after he returned to Ireland from working abroad and it was economically viable for him to take on the project.
Speaking on RTÉ’s Morning Ireland, Nick Taafe: “Viability comes down to raising finance and viability at that level is about raising finance to be able to start the project.
“Viability is also about an individual like me wanting to live in that area. So, for me the cost isn’t that important, it’s about being able to find a home and to live in an area that I want to live.”
However, Mr Taafe, who is a member of the Society of Chartered Surveyors Ireland, said vacant buildings are not normal retrofits.
He said: “These are vacant buildings that may have been vacant for up to 10 years or greater, so a lot of damage, and every building is unique.
“Every building will need unique design, unique constructive methodology and then obviously the cost will follow that as well.
“So, you don’t know what you’re getting into until you enter the building and start the project.”