We're splurging €6m a week on home improvement
Renovation boom driven by spiralling property prices
HOMEOWNERS have spent almost €40m in the past seven weeks doing up their homes, as they grow increasingly confident about the economy.
Almost €6m a week is being spent on renovations and extensions under the Government’s Home Renovation Incentive which was introduced in last October’s Budget, the Irish Independent has learned.
The rate of spending has doubled since the beginning of July compared with the previous nine months, bolstering the construction sector and hardware industry which have borne the brunt of the economic collapse.
The building industry has called for the scheme to be extended beyond the end of next year so more people can avail.
The increased spending comes amid deep concern about rocketing house prices in the major urban centres, which have risen over the past two years.
Experts said that many people were choosing to extend or renovate their homes due to higher prices and a shortage of new properties coming on to the market. However, it is also being driven by a belief that the economy will continue to recover. The latest KBC Ireland/ESRI Consumer Sentiment Index shows that confidence is returning, driven by an upsurge in employment and a belief that the worst is over.
The number of projects coming on stream was welcomed by builders’ lobby group, the Construction Industry Federation (CIF).
“This is good news,” CIF director general Tom Parlon said. “Consumer sentiment is improving and these figures bear this out.
“Construction is labour intensive. We have called for the extension of the scheme along with an increase in the maximum value to €50,000. We also feel that the full tax credit should be given in the year the work is done.
“We feel these measures will help to continue encourage badly needed construction activity.”
The tax break provides relief to homeowners where 13.5pc of the spend is returned by way of an income tax credit paid over two years.
It runs until December 2015.
The minimum investment is €4,405, excluding VAT, up to a maximum of €30,000. The tax relief ranges from €595 to €4,050.
New figures show that the scheme has been an unprecedented success, with €155m spent to date. However, there has been a splurge in spending over the past seven weeks, data from the Revenue Commissioners shows, with some €40m invested in more than 2,500 building projects since the beginning of July.
The figures show:
• Some 9,336 building projects have been completed since last October. Some 26pc of these have been finished in the last seven weeks.
• The highest number of projects is in the Dublin area, with 4,933. The total spend in the city is just over €90m, an average of €18,284 each.
• The lowest number is in Westmeath, at 94 with each averaging €11,045.
• The average spend per week between last October and early July was €3.19m.
• This has increased to €5.76m since last month.
Hardware Association Ireland, which represents 400 building merchants and DIY stores, said the Revenue figures tied in with research it commissioned which showed that business was improving.
But it also called for the incentive to be extended, saying that much of the economic recovery was centred around Dublin and could take longer to filter into the regions.
"We haven't been doing work to that extent for five years now," spokesman Jim Copeland said. "There's a shortage of homes, and also it's pent-up demand.
"We would ask the minister to make a couple of changes including allow people claim the tax credits back within a year."
The figures are borne out by the number of extensions and house conversions being granted planning permission. Last year more than 7,100 applications were for extensions from a total of almost 14,000. So far this year in excess of 2,000 extension have been approved, more than half the total of 3,833.
Only households which have paid the property tax and household charge are eligible, and builders must be tax compliant. Eligible projects range from window replacement to new kitchens, extensions, home decorating and replacement of septic tanks.
One building firm, House2Home.ie, said it had seen a "huge" increase in inquiries since it was introduced.
Last July it provided 42 quotations for building work, which increased to 72 this year, marketing manager Rory Clarke said. It currently employs 22 staff, up seven since the scheme was introduced.
"We're seeing people who made an inquiry 12 months ago coming back now looking to go ahead with the project. Last year, they may have been wary of spending €30,000," he said.
"I think there are people extending because they cannot find a home. People say they cannot move house, and so extend or renovate.
"If you could incentivise the construction industry to renovate existing buildings, it would help prevent prices from creeping up."