Barely a quarter of vacant or derelict properties in the Republic are financially viable for renovation, according to a new report by the Society of Chartered Surveyors Ireland (SCSI).
The study, which highlights the high costs and regulatory barriers faced by people trying to restore vacant properties, assessed 20 possible renovation projects, 13 residential/owner occupier type properties and seven investor types.
It found that just five – three in Dublin, one in Galway and one in Cork – were financially viable to renovate.
To be financially viable, the market value of the renovated property must be greater than the starting market value plus the cost of renovation. This is a key consideration for homeowners or investors seeking to renovate a property with mortgage funds.
Could social housing be the next property bubble?
Ireland’s economic future is bright, apart from a housing crisis, a sick health service and Donald Trump
Restoration of Notre Dame shows hard things can be achieved if we’re not afraid to be ambitious
Housing Agency buys 120 homes with tenants in situ for up to €645,000 each
When the maximum grants available under the Croí Cónaithe refurbishment scheme (€50,000) and an average SEAI (Sustainable Energy Authority of Ireland) grant of €21,500 are applied, only one further property becomes financially viable.
The SCSI noted, however, that if the main refurbishment scheme grants were increased from €50,000 to €100,000, the number of properties “becoming viable almost doubles”.
While the costs of renovating a property depend on its type, size, condition and location, properties in more affluent areas were more financially viable to renovate as they commanded bigger market values, the report found. The costs of renovating a residential owner-occupier property ranged from €161,000 in Askeaton, Co Limerick, to €377,000 in Dublin city to €605,000 in west Cork.
Among the investor type properties assessed in the report, the costs ranged from €354,000 in Co Limerick to €862,000 in Grafton Street in Dublin to €1.1 million in Co Kerry.
Hard costs, the bricks-and-mortar element of construction, typically made up 87 per cent of the total costs, with soft costs such as land, professional fees and VAT accounting for the remainder.
A survey conducted as part of the report found that eight out of 10 chartered surveyors believed it was more difficult for borrowers to access funding for a renovation project when compared with new or second-hand homes due to their potentially higher risk profile and challenges accessing fixed funding up front for a project.
More than half also claimed that building regulations, particularly those relating to fire safety and access and use, were too restrictive when it came to restoring older property units.
Among the recommendations contained in the report was a proposal for Croí Cónaithe to provide feasibility grants to help prospective purchasers assess the viability of projects similar to those offered in Scotland.
The report also noted that there are several data sources – local property tax returns, census results and GeoDirectory – which seek to account for the current level of property vacancies across the country, all offering different results and that there should be an official “vacant home register”.
SCSI president Kevin James said that given the importance of addressing the vacancy/dereliction issue, it was vital that the Government and key stakeholders were making decisions based on accurate information.
“Vacant and derelict buildings which lie vacant for extended periods can create a negative perception of a place, which in turn can be off-putting to potential new residents and investors,” he said.
“On the other hand the repurposing and subsequent occupation of these buildings can revitalise a town centre or main street as well as supplying much needed accommodation,” he said.
The Government is in the process of introducing a new vacant homes tax aimed at increasing the supply of residential properties.
