The Hidden Costs of Homeownership: Why Ireland’s First-Time Buyers Are Choosing Renovation… and Losing Out
Over €90,000. That’s the potential cost of bringing a typical three-bed semi-detached house up to a basic standard in Ireland today, according to recent estimates. As new builds remain largely unaffordable for first-time buyers (FTBs), a growing number are turning to “doer-uppers” – older properties requiring significant renovation. But this path to homeownership is riddled with financial and logistical challenges, and increasingly, it’s a route where FTBs are being outbid by investors and those with deeper pockets.
The Affordability Crunch and the Rise of the ‘Doer-Upper’
The stark reality is that affordable starter homes, particularly in city centres like Dublin and Cork, are vanishing. With limited new construction catering to the entry-level market, second-hand properties are the only viable option for many. However, these properties often come with a catch: they need work. This presents a unique set of hurdles, starting with access to financial support. Unlike new builds, second-hand homes don’t qualify for the Help-to-Buy scheme or, currently, the First-Home Scheme – though potential extensions to the latter are promised but unrealized.
The Green Premium: BER Ratings and Mortgage Rates
Even securing a mortgage can be more complex. Banks are increasingly tying mortgage rates to a property’s Building Energy Rating (BER). AIB, for example, offers a significantly lower fixed rate (3.1% vs 4.2%) for homes with a BER of B or higher. This “green premium” incentivizes energy efficiency but adds another financial layer for FTBs considering older, less efficient properties. Lower rates may be available from smaller lenders, but qualification can be difficult, especially when factoring in renovation costs.
Underestimating the Renovation Reality
Chartered Quantity Surveyor Nick Taaffe warns that buyers often underestimate the true cost of renovation. “Desperation to get on the property ladder can lead to a failure to properly assess the additional expenses,” he explains. While some upgrades can be phased, immediate work – such as addressing structural issues, replacing windows, or upgrading kitchens – can quickly escalate costs. A basic upgrade, encompassing floors, insulation, windows, and a kitchen, can easily reach €1,000 per square metre, potentially totaling €90,000-€100,000 for a standard three-bed home. More ambitious projects can exceed €2,000 per square metre.
The Value Gap: Renovation Costs vs. Return on Investment
A 2021 study by the Society of Chartered Surveyors Ireland (SCSI) highlighted a concerning trend: the increase in property value following renovation doesn’t always match the amount invested. This poses a risk for FTBs hoping to build equity and eventually trade up. The SCSI provides a useful guide to engaging a contractor for those embarking on renovation projects.
Navigating the Grant Landscape
While grants are available, they often fall short of covering the full cost of renovations. The SEAI offers schemes for energy upgrades, with potential support up to €35,000, but this is often insufficient for comprehensive upgrades. Smaller grants, like €1,300 for attic insulation, are more realistic but may not significantly improve the BER rating quickly enough to unlock cheaper mortgage rates. The SEAI’s Warmer Homes Scheme targets low-income households in older, poorly rated properties, leaving many FTBs ineligible. The newer Grants Towns Heart scheme, offering up to €70,000 for vacant property restoration, is a promising initiative, but requires a five-year retention commitment.
The ‘Bank of Mum and Dad’ and Cash Flow Challenges
Dublin mortgage broker Michael Dowling notes that financing renovations is a major hurdle. State supports are often paid out *after* project completion, creating a cash flow gap that frequently requires assistance from parents. Mortgage lending limits and salary constraints further complicate matters.
Who *Is* Buying the ‘Doer-Uppers’?
Cork estate agent TJ Cronin observes a curious pattern: while interest in fixer-uppers is high, they are often the slowest to sell. FTBs are frequently deterred by the complexity and cost of renovations, leaving the properties to be snapped up by tradespeople who renovate and either rent them out or sell for a profit. This leaves first-time buyers once again priced out of the market.
Looking Ahead: Will the Situation Improve?
The current landscape presents a significant challenge for FTBs seeking affordable homeownership. The combination of limited supply, rising construction costs, and complex financing options creates a perfect storm. Unless there’s a substantial increase in the supply of affordable new builds, or a significant expansion of financial support for second-hand property renovations – including extending the First-Home Scheme – the dream of homeownership will remain elusive for many. The future may see a growing trend of FTBs delaying homeownership altogether, or increasingly relying on alternative housing models. What are your predictions for the future of first-time buying in Ireland? Share your thoughts in the comments below!
