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Home renovation projects are like having a puppy. They cost more than you expect, make a vast amount of mess, can destroy valued possessions, and the work involved takes more time and effort than you imagined. Once done, you vow never to go through the whole experience again.
Until the next time. It’s some years since I undertook a major building project and I’m getting itchy feet. Should I even consider spending the cash or extending my mortgage to undertake some home renovations? Would I ever get my money back?
There’s nothing like the excitement of a transformative remodelling exercise. I’m not talking new carpets and a bit of paint. I mean full-on disruption. Moving walls, building cupboards, installing a bespoke sound system with integrated tech, discreet complex lighting and designer-led furnishing upgrades.
Well, the fun lasts until the work starts, and then you count down the days until it’s done. The results, however, can change your life and your home. For all the time, effort and trouble, you’d expect to receive your money back if you decide to sell. However, it rather depends on whether real value is added or you’re simply indulging your own lifestyle — something a prospective buyer won’t pay for.
Major projects can simply shovel money out of your bank account. Prepare yourself for the pain of transferring vast sums on a monthly basis. Think of it like your own HS2. The budgeted amount won’t be enough, and you’ll learn the real meaning of the most expensive words in the English language. “I may as well”.
The stock response to the teeth-sucking builder who, mid-project, suggests that although you have an agreed plan, they just found something else that needs to be done. Or you spotted a really nice Gaggenau unit that would do the impressive fridge job so much better than the cheap one you’d budgeted for from John Lewis because it was on special offer. And then you end up buying the whole range because mix and match appliances just won’t do.
It used to be so easy. Buy a house with or without a mortgage, live in it for a bit. Watch the value go up and sell it, tax free. Moving “up the housing ladder” was a seemingly easy game to play with a market that moved, mostly, in one direction.
Of course, there were anxious times. But as long as you avoided a 10-year market dip, you’d be fine. Throw low interest rates into the equation and an even bigger opportunity for a bounce. Borrow, rather than raid savings to extend or renovate your home, and, rule of thumb, you’d get £2 back for every £1 you spent. Tax free. Seemed like a good deal. But like all special offers, they come to an end.
With interest rates now much higher and a market struggling to absorb the changes, we’re in a new paradigm. That’s high-end estate agent patter for: it’s a challenging market in which we’re unlikely to see significant price rises for the foreseeable. Even with inflation burning away.
Until or unless businesses pay their staff more and investment banks and private equity firms crank out big bonuses, the top end of the market is, for want of a better word, stuffed.
Look at the leading indicators. The Royal Institution of Chartered Surveyors gives you some of the data you need. In its monthly survey for August, it said the share of agents expecting price falls over the next few months was at its highest level since 2009; buyer demand and agreed sales were both substantially down. And yes, on average, UK house prices have stayed more or less stable nationally but at the top end or in the south-east, they’ve fallen. And that’s without taking inflation into account.
In real terms, house prices have dropped, according to Yolande Barnes, a professor at UCL Bartlett Real Estate Institute. Speaking at the FT Weekend’s very own festival she also opined: “I’m really interested that the fixer-upper is coming back into vogue” — arguably because you can only gain value if you’re adding space or renovating a wreck. Once a house is at a certain standard, the marginal gains are limited. Buyers just won’t pay top whack for swanky makeovers.
So to my dilemma. When I bought my London house, it had been through extensive works, not necessarily to my taste but nicely done all the same. A decade later, and the mirrored glass wardrobes and lack of dressing room are beginning to irk. Yes, I have decorated and changed a few things around but have resisted the urge to do a rip. It’s all perfectly functional and doesn’t warrant it. I’d not receive an uplift in value.
Another factor here is building prices. Wages have gone up. Expect to pay £340 a day per worker (more in London) — and as for the price of bricks, who knew that such a simple thing could cost so much?
Some manufacturers are putting up prices three times a year, virtually doubling the cost per unit. And in case you wondered, depending upon the type of brick, they’ll now be between £1 and £3 a piece. Some blame Brexit for the cost increases (good for bants), others look at what’s really going on in the world, realising that inflation isn’t transitory while supply chains and energy prices have literally fuelled a major readjustment in costs. All leading to high interest rates.
Some of you may have a big chunk of change sitting in a bank account waiting to be spent. If you fancy a challenge, you may just find building works become a little cheaper as the cold economic winds bite. But now is not the time to borrow more.
And if you’re looking for the market to bail you out for your interior frippery, forget it. This is a lifestyle choice. As my grandfather used to advise: “Do it, if you can afford it.” He was very wise and, for now, the mirrored wardrobes and slightly faded curtains can stay because I need to save my cash, not spend it. Anyway, I’m not selling. They’ll take me out of my home in a box.
James Max is a broadcaster on TV and radio and a property expert. The views expressed are personal. X, Instagram and Threads @thejamesmax
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