Most projects to renovate vacant buildings for homes too costly, study finds

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Charlie Weston

The cost of renovating vacant properties to live in is so high it does not make economic sense most of the time to carry out the work.

This is despite a government grant scheme put in place to encourage the refurbishment of vacant properties, according to a major study by the Society of Chartered Surveyors Ireland.

The study of the costs of buying and renovating vacant and derelict sites found costs are so high that higher grants are need. Just five of 20 case studies reviewed by surveyors from all over the country were financially viable for restoration to habitable use.

When the grants for owner- occupier residences under the Government’s Croí Cónaithe scheme and the Sustainable Energy Authority of Ireland (SEAI) are factored in, just one additional property becomes financially viable.

Croí Cónaithe was announced by the Government last year and involves grants of up to €50,000 for the refurbishment of vacant properties for occupation as homes.

Of the 20 case studies, 13 were residential properties, with the others investor properties.

The Society of Chartered Surveyors Ireland (SCSI) said in its “Real Costs of Renovation” report that if the maximum Croí Cónaithe grant was increased to €100,000, three more of the case studies become viable, while two additional properties come within €4,000 to €5,000 of becoming viable.

Surveyors said the costs of renovating a property were highly dependent on its type, size, condition and location.

But the report stated that properties in more affluent areas were more viable to renovate than those in areas with lower property prices.

The study found the costs of renovating a residential property range from €161,000 in Askeaton, Co Limerick, to €377,000 for a property in Dublin city, and €605,000 for a property in west Cork.

For the investor-type properties in the case studies, the costs ranged from €354,000 in Co Limerick, to €862,000 in Grafton Street, Dublin, to €1.1m in Co Kerry.

Hard costs account for 87pc of the expenditure on renovating a derelict property. This includes plumbing, heating, extensions, doors and windows. Soft costs – such as professional fees, utility connection charges, planning fees – account for just 13pc of costs, excluding Vat.

This contrasts with previous SCSI reports on the delivery costs of new houses and apartments, which found an even split between hard and soft costs.

A key finding of a survey carried out as part of the report was that eight out of 10 chartered surveyors believe it is more difficult for borrowers to access funding for a renovation project when compared to new or second-hand homes.

This is due to their potentially higher risk profile and challenges getting fixed funding upfront for a project.

Planning regulations are also seen as too restrictive.

Chartered planning and development surveyor Lisa Rocca, one of the report’s authors, said the findings highlighted key challenges people taking on renovations projects would face around costs and accessing finance.

“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.”

She said there were 13 residential-type properties among the case studies.

In a scenario where the Croí Cónaithe grant is increased to €100,000, the number that becomes viable doubles to eight, while two more are on the cusp of becoming viable.

Ms Rocca said this meant it was clear increasing the grants would have a major impact with regard to financial viability.

Planning regulations for older buildings were now viewed as too restrictive, surveyors said.