Homeowner planning guide
Budgeting for a Complete House Refurbishment
How to build a refurbishment budget that holds up once the building is opened up.
A sound house refurbishment budget separates what you know from what you don't yet know, and allows for both.
What a budget should include
- Construction works: structure, envelope, services, finishes
- Professional fees: architect, structural engineer, other consultants
- Statutory fees: planning, Building Control, party wall costs
- Client-supplied items: kitchens, sanitaryware and flooring bought directly
- Temporary costs: alternative accommodation and storage while you move out
- Contingency for hidden defects
- VAT, where it applies
Why rates per square metre mislead
Published rates per square metre average out very different projects. A refurbishment of a sound 1990s house and one of a damp, structurally altered Victorian terrace can be the same size and very different in cost. Use rates only as a rough sense-check, never as a budget.
Contingency in older buildings
The older the building and the less investigation done, the larger the contingency should be. Investigation before pricing, such as opening-up, damp diagnosis or a drainage survey, reduces the unknowns and makes the contingency smaller.
Specification drives cost
Finish levels can change the overall cost considerably. Decide the specification early, so prices reflect what you actually intend to build.
Cash flow
Large projects are usually paid in stages or monthly valuations. Make sure funding is available at the right times, not just in total.
Next step
Tell us your budget band and scope, and discuss your project with us.
The parts of a house refurbishment budget
A realistic house refurbishment budget is built from several parts:
- Construction cost: the contractor's price for the agreed scope.
- Professional fees: architect, engineer, surveyors and, for period buildings, heritage advice.
- Statutory costs: planning, Building Regulations, party wall and utility connection fees.
- Client-supplied items: kitchens, bathrooms, flooring and appliances bought directly.
- Renovation contingency: a sum held back for genuine unknowns.
- Living costs: rent, storage and removals if you move out.
- VAT: usually payable on refurbishment, with limited exceptions such as some properties empty for two years or more. Take advice for your situation.
How much contingency is enough
For a well-surveyed house with opened-up investigation, 10 percent is often reasonable. For an older property that has not been investigated, or has visible damp, cracking or roof problems, 15 to 20 percent is more prudent. Contingency is not for upgrades; keep a separate allowance if you expect to change your mind on finishes.
Where costs of a complete house renovation grow
The cost of a complete house renovation in the UK most often rises because of:
- Hidden structural decay found on opening-up.
- Wiring, plumbing or drainage that cannot be reused.
- Changes to the design after work starts.
- Under-specified finishes priced as low provisional sums.
- Access problems, such as terraced houses with no rear access.
Controlling the budget
Agree a clear scope and specification, investigate before pricing, insist on written prices for changes before they are built, and review valuations monthly against the contract sum. A refurbishment that is properly investigated and specified usually costs less overall than one that starts quickly and changes on site.
How do you set a budget before you have drawings?
Work backwards from the total you can spend, not forwards from a builder's rate. Start with the full sum available, then take off the costs that are not construction:
- VAT. On most refurbishment this is 20 percent of the construction cost, so it is a sixth of any figure that includes it.
- Professional fees. Architect, structural engineer, surveys and party wall surveyors together commonly come to between 10 and 15 percent of the construction cost on a full refurbishment.
- Statutory fees. Planning and Building Control charges, and any utility connection costs.
- Contingency. See the section above.
- Living costs. Rent, storage and removals for the period you are out of the house.
What is left is the amount actually available for building work. It is usually a good deal less than people expect, and it is far better to find that out at this stage than at tender.
VAT on refurbishment in more detail
Most work to an existing home carries VAT at 20 percent. The exceptions are narrow:
- Homes empty for two years or more. Renovation by a contractor can qualify for the reduced rate of 5 percent. You need evidence of how long the property has been empty.
- Conversions that change the number of dwellings, such as a house into flats or two flats back into one house, can also qualify for 5 percent.
- Some energy-saving materials, such as insulation and heat pumps, are zero-rated when installed in a home, under a relief that is time-limited.
- Listed buildings. The zero rate for approved alterations ended in 2012. Listed status no longer brings any VAT relief.
The reduced rates apply to the contractor's supply. Materials you buy yourself are charged at 20 percent. The rules are detailed, so take advice from an accountant before relying on a reduced rate in your budget.
Fixed prices, provisional sums and estimates
These three are not the same thing, and a quotation can contain all of them:
- A fixed price is for defined work. It changes only if you change the work.
- A provisional sum is an allowance for work that cannot be defined yet. You pay the actual cost.
- An estimate is the builder's view of the likely cost and is not binding.
When you compare quotations, add up how much of each is fixed and how much is allowances. A quotation that is 90 percent fixed is worth more than a lower one that is half provisional.
Where to spend first when money is tight
If the budget will not cover everything, protect the work that is expensive or disruptive to do later:
- Structure, roof and anything that keeps water out.
- The cause of any damp, dealt with properly and not covered up.
- Wiring, plumbing, heating pipework and drainage, which are buried behind finishes.
- Insulation and ventilation that goes in while floors, roofs and walls are open.
- Windows and external doors.
- Plastering.
Kitchens, bathrooms, flooring, decoration and joinery can all be done to a simpler standard now and upgraded later without undoing anything. Saving on the first list to pay for the second is the most expensive mistake in refurbishment.
Why two quotations can differ so widely
It is common for prices for the same house to differ by a third or more. The cause is nearly always scope and not profit:
- One contractor has allowed for scaffolding, skips and protection, and another has left them out.
- Different assumptions about what lies behind the plaster.
- Different allowances for kitchens, bathrooms and finishes.
- One has included replastering throughout, another only patch repairs.
- One price includes VAT and the other does not.
Ask each contractor for a breakdown under the same headings and compare line by line before drawing any conclusion from the totals.
Keeping track once work starts
Hold a simple record with four columns: the contract sum, agreed changes, the amount paid to date and the forecast final cost. Update it at each valuation. Most budgets that fail do so through many small changes agreed on site, none of which was ever added up.