Starting a renovation / extension in 2020 vs 2021

pochard

Hi all,
before COVID19 changed everything, we were getting ready to build a 2 storey residential extension and associated renovation works starting in April (build duration of cca 6months).

What are your thoughts on starting the build after the lockdown - still in 2020 - versus waiting until 2021? The concerns are post-lockdown delays in material supply, possible second lockdown, ESB, Bord Gais delays etc.

Just wondering what are the thoughts of people in a similar situation...

Thanks

Dudda

I don't see any shortage of materials or additional delays above normal with ESB etc. Initially all you need is a digger and concrete. If a lot of people like yourself are considering delaying projects we'll potentially have an oversupply of building materials after a few weeks once things get back up and running.

The issues I see are mostly financial. Is your job secure, is the builder secure financially and what are the chances of him going bankrupt during the project, is the mortgage approved by the bank or would any delay in starting impact on the approval / drawdown? Would you get a cheaper tender price in 2021 to build due to the slowdown in the economy and construction?

If you're secure financially you could proceed and potentially haggle more for better prices on things as the build progresses.

old_house

We are in the same situation. Bought a house that needs a total renovation, planned for extension, new plumbing, electrics, modern heating, windows, insulation - the whole lot. Planning permission is granted and we were just getting quotes in which we frankly found to be outrageous.
So we would normally have gone back to the plans and started to look for savings by omitting things, but now I hope that savings can also be made on materials and labour.
The simple idea is that many people will no longer take out mortgages for large renovation projects that may not be immediately necessary and how many new housing projects will go live in the next year or two remains to be seen. So contractors who could cherrypick projects they liked until now may soon be happy to keep the show on the road even with slightly smaller profits.
We will do nothing for the moment, but we have the plans ready and will redo the tendering once the lockdown is lifted. If we can get prices down by say 20% overall (with some minor changes in the plans and the rest in savings for materials and work) we will go ahead. Luckily the financing was finalized before the current mess and should still be solid for a while.

Theboinkmaster

old_house wrote: »

We are in the same situation. Bought a house that needs a total renovation, planned for extension, new plumbing, electrics, modern heating, windows, insulation - the whole lot. Planning permission is granted and we were just getting quotes in which we frankly found to be outrageous.
So we would normally have gone back to the plans and started to look for savings by omitting things, but now I hope that savings can also be made on materials and labour.
The simple idea is that many people will no longer take out mortgages for large renovation projects that may not be immediately necessary and how many new housing projects will go live in the next year or two remains to be seen. So contractors who could cherrypick projects they liked until now may soon be happy to keep the show on the road even with slightly smaller profits.
We will do nothing for the moment, but we have the plans ready and will redo the tendering once the lockdown is lifted. If we can get prices down by say 20% overall (with some minor changes in the plans and the rest in savings for materials and work) we will go ahead. Luckily the financing was finalized before the current mess and should still be solid for a while.

20% saving very ambitious IMO.

DOCARCH

Theboinkmaster wrote: »

20% saving very ambitious IMO.

Agreed.

Contractors may end up with more costs, in the short to medium term, ensuring social distancing and CV-19 safe building sites.

Prezatch

old_house wrote: »

We are in the same situation. Bought a house that needs a total renovation, planned for extension, new plumbing, electrics, modern heating, windows, insulation - the whole lot. Planning permission is granted and we were just getting quotes in which we frankly found to be outrageous.

Do you mind me asking, what are you seeing approximately per sqm? Would say maybe 2,500 for single storey extension incl kitchen, 2k for renovation incl insulation, windwos etc. at a high quality finish? In the buying market and trying to get a rough gauge.

scwazrh

Theboinkmaster wrote: »

20% saving very ambitious IMO.

Maybe the small one man band will drop prices to get some work in the door but I would expect the majority of established financially secure businesses will be increasing prices .
We’ve all still got annual targets to try and hit only now we’ve to make up for lost time as well.

BryanF

scwazrh wrote: »

Maybe the small one man band will drop prices to get some work in the door but I would expect the majority of established financially secure businesses will be increasing prices .
We’ve all still got annual targets to try and hit only now we’ve to make up for lost time as well.

With the expectation the labourers will be working two meters apart..

scwazrh

BryanF wrote: »

With the expectation the labourers will be working two meters apart..

Coronavirus will become another item on the risk assessment for H&S to advise on and site management to act on

old_house

scwazrh wrote: »

Maybe the small one man band will drop prices to get some work in the door but I would expect the majority of established financially secure businesses will be increasing prices .
We’ve all still got annual targets to try and hit only now we’ve to make up for lost time as well.

That's like saying all the car dealerships will have to up their prices after the summer to make up for the lost sales in spring. Econony doesn't work like that.

Fewer people will have money to spend on renovations or new builds, so either the builders will have to accept to temporarily make less money to keep in work or some of them will have to close down to make the market viable for the remaining companies. The ones who raise their prices will be the first to go in a shrinking market. The only way around this would be to subsidise the industry with funds from elsewhere (i.e. new or increased grants), but I can't really see that happening on a large scale in the current fiscal situation.

old_house

Prezatch wrote: »

Do you mind me asking, what are you seeing approximately per sqm? Would say maybe 2,500 for single storey extension incl kitchen, 2k for renovation incl insulation, windwos etc. at a high quality finish? In the buying market and trying to get a rough gauge.

I don't have the exact numbers in front of me right now, but the quotes we received were around 350k for the renovation of a pretty standard 1950s detached 4 bed with a simple enough new rear extension and a small side extension, overall space ca. 160sqm. There was nothing special in the specs and when we compared with new builds we really couldn't see the value. My suspicion is that the builders derived some of those estimations from the area the house is in, which would generally be seen as rather expensive.
The house as is is sound and habitable. So we are not starting with a wreck, it is just old. We set a limit and we will stick to that, even it means that we will have to wait a bit longer. We are on the west coast, not in Dublin.

893bet

scwazrh wrote: »

Coronavirus will become another item on the risk assessment for H&S to advise on and site management to act on

Which means another cost to be accounted for.

Prezatch

old_house wrote: »

I don't have the exact numbers in front of me right now, but the quotes we received were around 350k for the renovation of a pretty standard 1950s detached 4 bed with a simple enough new rear extension and a small side extension, overall space ca. 160sqm. There was nothing special in the specs and when we compared with new builds we really couldn't see the value. My suspicion is that the builders derived some of those estimations from the area the house is in, which would generally be seen as rather expensive.
The house as is is sound and habitable. So we are not starting with a wreck, it is just old. We set a limit and we will stick to that, even it means that we will have to wait a bit longer. We are on the west coast, not in Dublin.

120sqm @ 2k = 240k
40sqm @ 2.5k = 100k

160sqm @ 350k seems about right, albeit for Dublin

enricoh

A mate of mine sent out drawings for an extension and revamp to 6 builders in February, one contacted him to say not interested.

The boot is on the other foot now, I'd leave it 6 months personally. Lads will be very keen to have something in the pipeline. The dreamers in their 2020 amaroks can keep dreaming!

old_house

Prezatch wrote: »

120sqm @ 2k = 240k
40sqm @ 2.5k = 100k

160sqm @ 350k seems about right, albeit for Dublin

Yes, it seems right for a time when more people with bigger budgets were competing for builders who in turn could pick the most profitable projects and ignore the others. These times are in the past now. You have to keep in mind how those prices developed, they were only in part forced by new regulations. The other part was achieved by simply adjusting the prices to what the market was willing to pay. So if house prices eventually go back to a level they were at a couple of years ago so will construction prices (maybe not quite, but probably close).

Not only will there now be fewer people with smaller budgets requesting the services of the construction companies, but the fall of prices of existing homes will make it a lot less attractive to spend big bucks on upgrading an average house. And the expected fall in rents following the demise of AirB&B and the likes coupled with the huge hit to the state's finances will make a rise in publicly financed new builds to offset that drop in demand unlikely.

So I am pretty sure that some of the more exposed construction businesses will shutter rather quickly and the remaining will do everything to stay in business for the next couple of years. I don't foresee a bailout coming for them. So we will see, but I'm convinced a significant drop in construction prices (like basically in everything else bar taxes) is inevitable and I am willing to support a local business that will be flexible enough to adjust first.

scwazrh

old_house wrote: »

That's like saying all the car dealerships will have to up their prices after the summer to make up for the lost sales in spring. Econony doesn't work like that.

Fewer people will have money to spend on renovations or new builds, so either the builders will have to accept to temporarily make less money to keep in work or some of them will have to close down to make the market viable for the remaining companies. The ones who raise their prices will be the first to go in a shrinking market. The only way around this would be to subsidise the industry with funds from elsewhere (i.e. new or increased grants), but I can't really see that happening on a large scale in the current fiscal situation.

You can’t really compare building services with cars sales though.New cars are usually behind people’s priority if their homes need building work.
You seem to be very much of the same opinion that became common during the last recession of builders will be desperate for work and will slash their prices .

Yes small week to week sole trader tradespeople will most likely take what they are given but anyone considering projects over €50k should be staying away from that type of builder .Anyone shopping around for a reliable established builder may be very surprised at how few of them are available for pricing jobs which will result in prices staying the same or increasing as further H&S site practices have to costed for.

old_house

scwazrh wrote: »

You seem to be very much of the same opinion that became common during the last recession of builders will be desperate for work and will slash their prices.

I'm confused. Are you disputing that builders were desperate for work the last time round?

https://researchrepository.ucd.ie/rest/bitstreams/23019/retrieve wrote:

The extraordinary growth and subsequent collapse in construction employment before and after 2008 can also be seen, with the share of construction workers peakingat around 13 per cent in 2007, substantially higher than international norms, and subsequently collapsing to about 8 per cent at the beginning of 2010 and levelling at around 5 per cent by 2012.

scwazrh

Eager for work / needing work is not the same as being desperate . The market sets the prices and buildings companies choose to work at those prices or not. The idea that builders will be slashing their prices to get your work in my opinion is wrong.
Any customer who thinks that the boot is on the other foot as previously mentioned and that now is the time for the dreamers to get real will find that a builder forced to cut rates and accept lower pay will see the quality of work will take a hit.
Established companies like I’ve referred to will price the work at the rates they need and continue on as most of them have been through a recession before and will avoid the race for the bottom prices that put so many to the wall.

old_house

scwazrh wrote: »

Eager for work / needing work is not the same as being desperate . The market sets the prices and buildings companies choose to work at those prices or not. The idea that builders will be slashing their prices to get your work in my opinion is wrong.

Yes, this is true in extreme cases were the offered amount would mean that the business would lose money on the contract. If you have fixed costs that need to be covered and you get a job that covers those costs even if only partially it ist still a better long term strategy to accept it. The alternative would be to shut down the business once you run out of "acceptable" work. And I have no doubts that many will.

scwazrh wrote: »

Any customer who thinks that the boot is on the other foot as previously mentioned and that now is the time for the dreamers to get real will find that a builder forced to cut rates and accept lower pay will see the quality of work will take a hit.

Maybe I should clarify that I don't see this as a moral problem - it's fine for any business to go for the most rewarding work if they have the opportunity to choose. So I would not have any desire to "punish" people for previously high prices, but I would also not pay an amount that wouldn't be justifiable in the current conditions. It's not a choice anymore, the money will just not be there to keep going like before. And quality of work doesn't even come into this.

scwazrh wrote: »

Established companies like I’ve referred to will price the work at the rates they need and continue on as most of them have been through a recession before and will avoid the race for the bottom prices that put so many to the wall.

Survivorship bias. Yes, some made it through the last recession. Many did not. And maybe this time the ones who adapt first will prevail. I have no desire to see businesses go belly up, but I also have no doubt that there won't be a market for all of them by this time next year. And that will be true for every part of the economy apart from the producers of facemasks and disinfectants...

McOptimist

scwazrh wrote: »

The idea that builders will be slashing their prices to get your work in my opinion is wrong.
Any customer who thinks that the boot is on the other foot as previously mentioned and that now is the time for the dreamers to get real will find that a builder forced to cut rates and accept lower pay will see the quality of work will take a hit.
Established companies like I’ve referred to will price the work at the rates they need and continue on as most of them have been through a recession before and will avoid the race for the bottom prices that put so many to the wall.

Times have been booming for the building industry in last few years. Labor costs in construction industry rise in a boom as there's big demand for construction workers. It follows the cost of building rises too as a developer needs to cover costs. On top of that, demand rises as consumers\businesses have more money which leads to building costs rising as developers increase margins; both because they can pick\choose jobs and because they know they can increase margins and still get work due to demand outweighing supply.

We are heading into the biggest economic downturn since the great depression, as outlined by IMF https://www.breakingnews.ie/business/imf-head-warns-of-worst-economic-downturn-since-great-depression-993282.html

Over the next while the demand for construction will drop as consumers\businesses have less money to spend, which will lead to building costs dropping as developers cut their margins as they compete for a smaller pool of construction jobs. Demand for construction will not outweigh supply. It follows that labor costs will fall also as construction workers are in less demand due to less construction happening, this will reduce building costs also.

I can't see how it will not be cheaper to build in 2021\2022 in comparison to 2019. It's just a natural consequence of heading into a recession (or even worse, a depression).

McOptimist

For the OP. If you didn't absolutely need to build right now and you were guaranteed to have the funds to build mid 2021 it may be wise to hold off. Not just for the hope of getting it built cheaper, but who knows what their personal circumstances will be if things go quickly south end of 2020\start of 2021 and we are plummeting into a depression as IMF predict.

If relying on the funds from a bank, and things go quickly south you may find it harder to get the money from the bank. So if you were confident of your circumstances being secure even in a downturn, it might be wise to get it built asap.

pochard

Thanks for the opinions everyone, much appreciate the discussion. I don't count on building costs decreasing in 2021 although it would be nice. I would be happy to proceed at today's prices. The work is funded from savings.

My concern for 2020 is that a 6 month build can easily turn into a 9-12 month build (we'll need an alternative accommodation for the duration) due to unforeseen delays (e.g. windows, roofing coming from abroad, post-lockdown backlog of various services).

Considering the building costs are unlikely to rise significantly, 2021 looks less risky with respect to the delays.