Budget is the bedrock of building Value

A clear plan should keep costs down and help your property to appreciate, writes Mark Channing

Many homeowners are gearing up to splurge on home improvements, but without proper planning many will overspend or get poor value for money.

A survey by KBC bank found 41% of households plan to carry out home improvements over the next 12-18 months, with one third planning to spend more than €5000.

Experts say advance planning is vital to get value for money and the result you wanted. Kathryn Meghen, Deputy chief executive of the Royal Institute of the Architects of Ireland, said: “People often spend unwisely and find themselves spending more money to get remedial work done a few years later.”

We tell you how to finance work on your home, how to keep costs down and what improvements are likely to add the most value to your house.

What finance is available?

If you must borrow, a low-interest loan is the first step in keeping costs down.

Banks have specialist home improvement loans that are cheaper than standard personal loans.

For amounts up to €5,000, Bank of Ireland is cheapest with a variable interest rate of 9%, according to bonkers.ie, a price comparison site. For loans of €10,000-€20,000 KBC is cheapest at 8.9% fixed.

Credit unions are cheaper, charging of an average of 7.25% for home improvement loans, although rates vary widely between credit unions. “Rates can be as low as 6%,” said the Irish league of Credit Unions. You may have to pledge your savings as security for a credit union loan, forcing you to borrow more than if you got the loan from a bank.

How can I control cost?

Deciding what work needs to be done in advance, setting a budget and securing competing quotes from different building contractors are the keys to managing costs.

“The most basic mistake is to decide you need an extension when this might not be the case,” said Meghen. “Often you just need to rework what you have.”

Engaging a surveyor and an architect before work starts will help you figure out what is possible within your budget. Gary Mongey of Box Architecture in Dublin said: “For a reasonable amount of money in terms of fees, you can quickly get a good idea of how much money a project needs.”

You should ask two or three experienced builders to tender for the job and check the quality of their work before deciding. Andrew Nugent, vice president of the Society of Chartered Surveyors Ireland, said: “Check references to ensure the builder has a good track record.”

Don’t asume the builder with the lowest quote is the one to hire. “The cheapest price may not necessarily be the best price,” said Nugent.

Prices vary according to the nature of the job and where you live. According to the home improvement index from onlinetradesman.ie, the average cost for an extension was €981 per square metre in 2014. Prices in Dublin were more expensive. The average total spend was €25,495.

What are the common pitfalls?

Homeowners often overlook costs such as decoration required after plumbing and electrical wiring is done. Changing your mind in the middle of a project also increases the chances of going over budget.

“Once you send out a tender document, don’t change it,” said Mongey. “Changes on site cost money and that’s where figures can go haywire.”

It’s a good idea to withhold some money from the builder until the job is completed to your satisfaction. Standard-form contracts drawn up by the SCSI provide for 10% of the value of the contract to be withheld. This insures any defects or problems get sorted out.

Insurance experts advise getting written confirmation that tradesmen and builders hold valid and up-to-date liability insurance. If not, you could be liable for any accidents that occur on site.

Brian McNelis of the Irish Brokers Association said: “If the painter isn't insured and drops a can of paint that injures your neighbour, the neighbour will most likley sue both you and the tradesman.”  

What tax breaks are there?

The home renovation incentive (HRI) allows you to reclaim VAT paid on the cost of repair, renovation or improvement works through tax credits spread over two years following completion of the work. To qualify,  you must spend €4,405- €30,000, which gives you tax credits of €595-€4,050 over two years.

You can claim the relief once your contractor has entered details of the work on Revenue’s online system. Barry Flanagan of taxback.com, an advisor, said: “Make sure the details of the work have been imput to the HRI’s online system by the contractor before the work even starts. Revenue advises not to engage the contractor if you don’t see the work details online.”

To qualify for HRI, the work must be completed by the end of this year. “Homeowners with plans to refurbish should get going now, otherwise they lose that opportunity,” said Nugent.

Last week Revenue issued details of another property based tax scheme, the Living City initiative, more than two years after it was announced by the government.

There relief is worth 10% of the value of work done on period houses built before 1915 designated parts of Dublin, Cork, Limerick, Galway, Waterford and Kilkenny.

What about grants?

Cash grants for energy efficient improvements were increased in March this year. Under the Better Energy Homes scheme, a semi detached house qualifies for cash payments of up to €4,700 for external wall installation, a boiler and heating control upgrade, and cavity and attic insulation.

You can get a €3,400 grant towards internal wall insulation, a boiler and heating control upgrade and installation of solar thermal heating in an apartment.

You can get grants and HRI tax refunds on the same job, but three times the value of the grant is deducted from the HRI qualifying expenditure.

What improvements add most value?

Improving the insulation and thermal performance is most likely to add value to your house. You also benefit from lower energy bills.

“People historically overlooked insulation but this is changing because energy costs are so significant, particularly for older properties,” said Nugent.

Mongey said: “Your house is like your car - it’s the stuff under the hood that important.”

Apart from insulation, a well done extension should increase your home’s value. Angela Keegan, the managing director of property website myhome.ie, said: “A good extension which incorporates a good family living area is always appealing.”

Kitchens and bathrooms also add value but Keegan advises against extravagant investments. “I wouldn’t encourage anybody to spend a fortune on a bespoke kitchen unless that’s what they really want,” she said.

“It won’t make your house worth €50,000 more than your neighbour’s.”

Angela Moore saved on home improvements by paying an architect by the hour and managing the project herself. Moore and her husband Tom, who are in their seventies, created an open-plan kitchen, dining and living area in their home in Leopardstown, Co Dublin.

They saved on professional fees by hiring Eva Byrne of houseology.ie, an architect who charges by the hour without the need for a long-term contract.

Byrne spent two hours with Moore advising her on the work and providing scaled sketches and a written report with guidance on how to carry the project forward.

“I wanted the advice of an architect but I knew exactly what I wanted and was confident I could manage the project myself,” said Moore.

She asked two builders who had been recommended to quote for the job, checking on previous projects to make sure she was happy with the workmanship.

“The contractor was able to do everything. I was happy with his work. He was very much a ‘can do’ person,” said Moore.

Moore also saved money by buying new kitchen cupboards from IKEA rather than going to a bespoke provider. The original kitchen cupboards came from Italy, but you can’t tell the difference,” she said.         


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