In the last couple of weeks I have heard two stories about house buyers getting cold feet once the quote for renovations arrives. One involved a three-bed semi-D in leafy south Dublin that needed modernisation. Two buyers pulled out once they got a survey. It’s now back on the market. The other was a cottage in Kilkenny city that also needed extensive work. It was sold 30 months ago and is now back on the market for a second time at 30 per cent below its original sale price.
A sample of two may be enough to define a trend for the purposes of a newspaper column but perhaps not enough to call a definitive inflection point in the second-hand housing market. But Dublin City Council has this week lent some credence to the notion that refurbishment costs are putting a brake on second-hand house prices across the market.
The cost of renovation has been an issue for a while at the top end of the market, according to estate agents. Owen Reilly, in its end of year review, noted: “At the upper end of the south Dublin market, both activity and values plateaued, particularly for properties requiring extensive renovation, which proved increasingly difficult to sell.”
But the problem now seems to have spread to Finglas, Phibsborough, Drumcondra and Chapelizod, the North Wall and Mountjoy Square.
Dublin City Council said this week that it is now considering disposing of 32 properties in these areas which it acquired over the last eight years with the view to refurbishing them for social housing. The council says it does not have the resources – another word for money – to do them up to the required standard and is looking for approval from city councillors to sell them.
They were arguably not the best investment the council ever made. Robert Buckle, a senior council engineer with the housing division, said last month that a number of properties had been bought “regardless of their condition” in an effort to secure additional social homes in response to the housing crisis. Some “really shouldn’t have [been] bought at all”, he said. Sounds familiar.
Assuming the city councillors give the go-ahead for the sale, the identity of the buyers and what they pay for them could tell us a lot about how far and how deeply the chilling effect of refurbishment costs on the values of second-hand houses has spread. What will be particularly informative – if we ever find out – is whether the council gets more than it paid for them.
First on the block will be a row of derelict cottages in Chapelizod that have been on the council’s book since 2022 when they were bought for refurbishment. They will go on the market within weeks. The obvious buyer is a small building contractor – just the sort of guy who is probably in great demand for home refurbishments and able to charge top dollar. Any bid they make will have to factor in the opportunity costs of forgoing all this work while taking a punt on cottages in Chapelizod.
The next-best alternative is someone who qualifies for the derelict or vacant property grants. They can get €50,000 to €70,000 from a local authority to renovate a home. The property must have been vacant for two years or more and built before 2008. You can apply if you are in the process of buying the property. And if you are feeling really brave, you can get two grants – one to refurbish a home and another for a home for rental.
You might also get a Local Authority Purchase and Renovation Loan if you qualify and your income doesn’t exceed €70,000 for a single person or €85,000 for a couple. The maximum you can borrow in Dublin is €373,500 (for a property value of €415,000) and you have to plan to live there.
There is only anecdotal evidence of an increase in sales that are falling through because the purchaser finds out they can’t cover the refurb bill. But there is plenty of evidence that building costs have gone up substantially.
Anyone hoping that the apparent brake being put on the value of second-hand homes is a sign that the laws of economics are finally asserting themselves in the dysfunctional Irish property market is likely to be disappointed.
If anything, the council’s proposed plan is just a sign of further dysfunction. It makes little sense for the State to dispose of houses that it deems economically unviable to renovate but at the same time be prepared to finance their purchase and renovation by others.
