With spiking interest rates and widespread materials shortages, does it make financial sense to spend on home improvements right now?
We’re a nation of renovators. Prior to the pandemic, we loved doing up our homes, and it seems the trend has only accelerated.
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According to research by Rated People, nearly two-thirds of tradespeople say that 2021 was their busiest year ever. Its annual Home Improvement Trends Report for 2022 says that building work was already in high demand in 2020, and interest in home improvement saw “exceptional growth in just two years, with demand rising by a massive 50% since 2020”.
For a long time, the ‘don’t move, improve’ philosophy has been drummed into us by property experts, and now with the cost-of-living crisis resulting in rising mortgage costs and the highest single inflation rate hike in 30 years, staying put and improving on the things may seem more appealing than ever.
However, before you book a builder, it’s worth considering whether it’s financially viable, as the same report from Rated People suggests that refurbishment projects are now costing 40% more than they did two years ago.
Is now a good time to improve your home?
There’s no escaping it: building renovation has become an expensive business.
Brian Berry, Chief Executive of the Federation of Master Builders (FMB), says: “Economic pressures and uncertainty make this a particularly challenging time for builders and customers alike. FMB data shows that both material and labor costs have increased significantly in the past two years, buffeted by the cumulative effects of the pandemic, changes to immigration rules, supply chain delays, and the war in Ukraine.”
But Berry says that shouldn’t necessarily put you off: “While our latest data shows 60% of local builders reporting delays to jobs due to materials and skills pressures, with good communication, clients’ dream projects can still be realized. With energy prices skyrocketing, it’s a good time to consider working with a builder to improve the energy efficiency of your home, making it both warmer and cheaper to heat.”
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The decision between making home improvements and moving house depends very much on where you live and your price scale.
David Hannah, Group Chairman of Cornerstone Tax, says: “If you look at a loft conversion, for example—you could pay between £30,000-£50,000 on it, meaning you’re spending more than you would spend on stamp duty for a new house. If you’re looking at major renovations then it may work out cheaper to move, however, the stress that comes alongside moving to a new house is not an easy thing to deal with—especially in the current property market.”
Hannah thinks it’s unlikely that property prices will fall in the near future, and although you could wait for building costs to come down, it’s hard to predict when this could happen, so you could be waiting for much longer than you want. “It’s a good idea to do home improvements because you’re adding value to your property in the longer term and it will be less stressful than moving,” he concludes.
Why have renovation costs increased?
Clive Holland, broadcaster on Fix Radio, says that the current economic climate is not helpful in terms of build costs, but it’s far from the only factor: “The economic crisis is affecting the industry as we speak and it’s actually getting worse now, creating what I class as a ‘perfect storm’. We had Brexit and we had the problems that Brexit brought, particularly with the huge amount of foreign workers going back home. This leaves us with a shortage of approximately a quarter of a million people for the next five years,” he explains.
“Then, of course, nobody foresaw the Covid situation or what that would bring in terms of the shortage of materials and the soaring costs. The price of timber, for example, has gone up by 100% in just two years.”
Which renovations will add value to your home?
Bearing all the above in mind, if renovating your house is still the best option for you, then it’s worth looking at which home improvements will add the most value to your property.
According to Rated People, the top value-adding home improvements last year were a self-contained annexe, a loft conversion, a kitchen extension, a new kitchen, and a summerhouse or garden room.
With energy prices high in buyers’ minds right now, Simon Bath, CEO of property technology company, iPlace Global, says green renovations are also proving popular with homeowners. He says: “We recently conducted research found that 36% of homeowners think that making their home more energy efficient is a priority for them in 2022. Green renovations are becoming the go-to not only because they add value to existing properties, but they can also help homeowners save on energy costs in the long run.”
Additional things to consider when planning a renovation project
All major building projects such as extensions incur unexpected costs, so you’ll need to make sure your home renovation project doesn’t become unviable and that you budget sufficiently for it. You’ll also need to factor in other hidden costs and timings, which could delay your project, such as architects.
While you may not need an architect if you are doing home improvements within your house’s existing footprint, for extensions you would probably be better off employing one.
Image credit: Pixelfritter / Alamy Stock Photo
For planning applications for single-storey extensions, architects charge from £1,000, going up to £1,800 and above if you require them to provide building regulations drawings. Depending on where you live and how involved the project is, you could more realistically expect to pay between £2,000 and £4,000. In terms of timescale, it’s generally at least a month between a site visit and receiving any assets from them.
And finally, don’t forget planning permission. Large-scale building projects usually require it, and the process can take around three months and costs upwards of £200. If you are extending your property to the rear by less than 3m for an attached house or 4m for a detached house, then this may fall under ‘permitted development’, which means you can get on with the work before receiving formal permission. However, it’s always best to check the current planning permission regulations before you start any building project.
But don’t worry if you get cold feet. According to Planning Portal, if you are granted planning permission but decide to put your project on hold for a while, you have a leeway of three years to begin the development, unless your permission states otherwise. If you haven’t commenced work by that time, you may need to reapply.
READ MORE: 10 things you should always ask your architect before starting a project
Main photo: 2015 Sponner / Shutterstock