Why it may not make financial sense to buy a home for €30,000

Drive through any town or village in Ireland, rural or otherwise, and you’ll be struck by the number of derelict properties that line the streets. At a time when housing is in need everywhere, renovating vacant and derelict properties is essential to bringing life back; but converting them isn’t always straightforward.

Consider Bennett’s Bakery on Main Street, Blackrock, Co Dublin, which came to the market at auction in May 2021. The property, a time capsule of another era, was opened by Ellen Bennett in 1925 and operated as a bakery until it served its last soda bread some thirty years ago.

The building had been left untouched for decades, and as described in The Irish Times at the time of auction, looked like a film set, furnished with a pair of blackened ovens and a commercial-sized mixing bowl still in situ. It had plenty of potential to create a home for new owners in the ever-popular seaside suburb.

The property subsequently sold before auction at €395,000 before changing hands once more in May 2022, at a substantial uplift, selling for €470,000.

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[ More than 50 pubs apply for conversion to homes without planning permission ]

The new owners swiftly set about trying to capitalise on the property’s potential by seeking to convert it to a residence. As part of this, the owner sought confirmation from Dún Laoghaire-Rathdown County Council that the property would be exempt from planning permission, due to the fact that they were looking for change of use from a vacant commercial premises to residential use.

Planning adds costs and time to a project, so getting an exemption makes the whole process easier.

An exemption was not granted however, as the council ruled that such a conversion “constitutes development, and does not constitute exempted development”.

Now the owner has to decide whether to go ahead and seek planning or not.

But should it be so difficult? After all, Government policy is behind such renovations, with grants of up to €70,000 available to renovate derelict properties.

Another challenge is the cost involved. A recent report from the Society of Chartered Surveyors (SCSI), which looked at the real cost of renovating vacant and derelict properties, found that only a quarter of the 20 renovations profiled were deemed to be financially viable.

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For example, the renovation of a historic two-bed home in Beara, Co Cork, which cost a staggering €600,000 to repair and restore to a modern standard, left a shortfall of more than €380,000 based on the post-renovation market value. And even if Croí Cónaithe/SEAI grants could have been factored in, the shortfall would still have been more than €300,000.

Even the acquisition of a home in Askeaton, Co Limerick, for just €30,000, still came up short to the tune of about €100,000 on the financial viability assessment, due to high construction costs, as the home was only valued at €145,000 post-renovation. The addition of State grants does diminish – but not eliminate – the shortfall.

A better proposition was the renovation of a three-bed early 19th century home in Portobello, Dublin. Thanks to high property prices in the chi-chi suburb, a pre-renovation market value of €385,000 soared to €865,000 thereafter, ensuring the project was in the black to the tune of more than €100,000, even before grants could be applied.