Renovation costs in a recession

mi-key

propertyhunter said:

This is why wondered that if interest rates get any higher, people will redirect money into paying off the mortgage or moving, rather than redeveloping, especially in London where refurbishments with a rear single-storey extension can be £150-200k for the ground floor and then there's the whole upheaval of the building work.

But then in London that probably adds more than £200K to the house value if they wait a few years..

mi-key

FFHillbilly said:

mi-key said:

the BoE are going to stop raising rates soon as they realise it is making no difference at all 

they said that in April at 4% didn't they?
my prediction is all previous predictions will turn out to be wrong because you can't predict the future!

Well at some point they are going to have to admit inflation is nothing to do with people spending too much and is from outside factors and raising the rates isn't going to make any difference ( as it hasnt so far after 13 rate rises ! ) 

twopenny

As someone who hasn't been able to get a bathroom installed for 4yrs and much other stuff I'm now on a roll because for some money is tied up in mortgage and food. Many products produced for the high demand don't have a home and there's sales on.
Trades are more available and a lot have been cashing in on up grading their homes and sudden drop in demand. Still busy but like many have taken on a lot and have to pay for it.

But this is rural ie not London. Pensioners have gone from zero to getting interest, families not doing so well. A lot of people have had work done or are staying still.
It's interesting. - and it's gone wild for a short time.
Ideal properties going £100,000 over norm and some being reduced with the same footprint.

If you have a good location and are developing to improve the building for an in demand area that will always be good. If you're just doing the bathroom and kitchen scenario that's probably not worth it.

Section62

propertyhunter said:

Does anyone know what happens to building costs during a recession induced by higher interest rates?

In the past the construction sector has typically grown through recessions - in part due to public money flowing to keep the economy going, and part people and businesses doing what you are thinking of and spending money on development when demand and prices might be lower.  In particular office and retail development tended to boom because the investors would want these to be ready and opening at the start of the upturn, rather than still be building long after normality had returned.

The thing is we haven't had a major recession since the pandemic, and we haven't had a major recession since the growth of online shopping and working from home.  Whether the past repeats in the future is uncertain.

But Doozergirl is right about the major infrastructure projects... and with the campaigns about sewage overflows we might expect more major projects to come forward rather quickly.  The public sector has always been able to borrow money relatively cheaply, so rising interest rates won't necessarily have an adverse impact on the volume of work being done.

So I wouldn't bank on being able to get cheap building work done any time soon (because of material costs as much as labour) and waiting in the hope of prices coming down just means not being able to take advantage of the home improvements you'd be investing in, so overall personally I'd just get on and do it rather than gambling on a recession having a beneficial effect.

ComicGeek

Most tradespeople that I work with have been working such long hours over the last few years that the first thing they will do when there's a slowdown in work is take a long holiday.

With my work load at least 30% higher for the last 3 years, I can well afford to work a 3 day week if work really drops off. But after 20+ years in the industry and numerous large and small recessions it has never once been quiet enough for me to lower fees - if you're good then people will pay it, the ones that are quiet and drop their fees are the ones to avoid.

I did my extension 6 months after Covid hit when materials shortages were starting to hit, and with big price increases on timber. Everyone thought I was mad and should have waited - I wouldn't have been able to afford it if I had waited.  

propertyhunter

So my budget is £250k, 3 bed detached house in Zone 6 London. Needs new electrics and plumbing throughout, a new bathroom upstairs, toilet downstairs and kitchen alongside a wraparound single-storey extension (about 60 m2). I'm worried this is not doable because I hear stories from friends and neighbours that costs are extortionate. 

I'm going to have to speak to an architect and then get some builders quotes in. 

DRP

Inflation will eventually ease, but prices will not come down. Wages may catch up, in time. 

stuart45

I've known wages to drop a fair bit in the trade over the years. In the late 70's tradesmen went from £30 a day, to people working for £10.
Late 80's, early 90's £85 a day down to £40.

mi-key

stuart45 said:

I've known wages to drop a fair bit in the trade over the years. In the late 70's tradesmen went from £30 a day, to people working for £10.
Late 80's, early 90's £85 a day down to £40.

Those were times when there were a lot more tradesmen though. Apart from less people now going into trades, we also lost a lot of the overseas workers. Back then it was more to do with there not being enough work, so tradesmen had to drop their prices just to try and get work coming in. You certainly didn't have a one year waiting list for most jobs then.

The builders I know are finding it impossible to get new skilled workers

Borrowing ( despite the increases ) is still relatively cheap, so people can afford to spend money on their houses, so the builders will be kept busy even with a drop in demand

propertyhunter

mi-key said:

stuart45 said:

I've known wages to drop a fair bit in the trade over the years. In the late 70's tradesmen went from £30 a day, to people working for £10.
Late 80's, early 90's £85 a day down to £40.

Those were times when there were a lot more tradesmen though. Apart from less people now going into trades, we also lost a lot of the overseas workers. Back then it was more to do with there not being enough work, so tradesmen had to drop their prices just to try and get work coming in. You certainly didn't have a one year waiting list for most jobs then.

The builders I know are finding it impossible to get new skilled workers

Borrowing ( despite the increases ) is still relatively cheap, so people can afford to spend money on their houses, so the builders will be kept busy even with a drop in demand

I'm not so sure borrowing is that cheap any more in London where mortgages are based on high income multiples. It's here where you'll find people facing thousands of pounds more in monthly mortgage payments when they've got £400k+ mortgages. I dread to think what will happen when those individuals currently on 1-2% fixed rates have to remortgage.