Even with the best planning in the world, home renovation costs have a tendency to spiral out of control.
There will always be unforeseen expenses, including changes in regulation, inflation, increases in the price of materials and hidden issues that need to be rectified, but these are often not the reason for builds costing more than expected.
We spoke to four building experts about why property renovations go over budget and what can be done to prevent this from happening.
Why do home builds go over budget?
The main reason for an unrealistic renovation budget is that the original brief isn’t sufficiently detailed or properly costed.
“The more work done upfront to investigate the site conditions and access, and the more developed the design and specification, the greater the cost certainty that can be achieved,” says Michael Holmes, property expert for the Homebuilding & Renovating Show.
It’s also common that customers change their mind about what’s required during the build process.
“Most budgets spiral, not because of the original quote, but because of decisions made mid-build, eg changing the tiles, upgrading the fixtures, adding an extra socket,” says Jeremy Gray, head of external affairs at the Federation of Master Builders. “Every change should be costed and approved in writing before it’s carried out.”
While the above can be avoided, there will be unexpected issues that can’t. “We see the biggest budget surprises are structural surprises uncovered after work begins,” says Angela Kerr, director of HomeOwners Alliance.
Damp and outdated services are also frequent causes of increased build costs.
Which projects are the most and least likely to blow a budget?
Unsurprisingly, the more complicated a renovation and build, the more susceptible it is to budget changes.
“Extensions, loft conversions and refurbishments of older properties are especially prone to overruns because they often involve structural work and unknowns,” says Kerr.
“Projects that need planning permission, party wall agreements or significant design changes also attract delays and additional costs.”
Those least likely to spiral include simple cosmetic updates, such as kitchen and bathroom refits that don’t involve moving walls, and new builds on a clear site.
What contingency plan should you have in place?
The contingency plan you set aside should be dependent on your build type.
“Contingency should reflect risk profile: new build on a clear site: 5-10%; standard extension: 10%; renovation of an older property: 15-20%; listed buildings or structural alterations: 20%-plus,” says Tim Phillips from Quantiv, quantity surveyor for the Homebuilding & Renovating Show.
“A contingency is not spare money to upgrade finishes. It is risk allowance for genuine unforeseen costs.”
What to do before a build starts
Preparation and time is key to keeping costs down. Make sure you get three quotes and be wary if one of them comes in significantly cheaper than the rest.
“Homeowners should ask for a fully itemised written quote, what’s included and excluded, and how variations will be priced,” says Kerr. “It’s also sensible to ask about payment terms, retention amounts and how unexpected costs will be dealt with.”
Make sure the quotes you are comparing are like-for-like.
You should have a written contract with your builder, outlining what is paid and when. “When agreeing payment schedules, work with staged payments linked to progress and avoid paying large sums up-front,” adds Kerr.
Be sure to ask your builder as many questions as possible about the details. “Ask specifically about materials, waste disposal, and VAT; these are common areas where costs appear later if not clarified upfront,” says Gray.
“What happens if you find something unexpected? Say, damp behind a wall or outdated wiring? How will you communicate that to me and agree a price before proceeding?”
Holmes suggests bringing in a quantity surveyor early in the process. “By using provisional allowances and experience from other projects, they will be able to produce a budget – but it will be full of assumptions,” he says.
To make these assumptions as accurate as possible, it’s important to know what your design is going to be.
“Where a design is fully developed to Royal Institute of British Architects (RIBA) Stage 4 – Technical Design, a quantity surveyor will be able to prepare a far more reliable cost plan, often populated with tenders from subcontractors for packages like heating, plumbing, and electrics, as well as any specialist items like bespoke doors and windows,” Holmes adds.
What to do during a build
Once the build is under way, it’s important to stick as much as possible to the original plan and only change your mind if absolutely necessary.
“Changes rarely result in cost savings – unless they are a significant reduction in the scale or scope of the project – and most result in cost overruns and extensions to the programme to accommodate the changes,” says Holmes.
If changes have to be made, give yourself time to consider them properly. “Don’t make big decisions under pressure, says Gray. “When a builder is standing in front of you, mid-project, asking you to choose between two options on the spot, that’s when expensive mistakes get made.”
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It’s also important to protect yourself for every kind of eventuality, including if there’s an accident or if your builder goes bust during your renovation.
“Make sure your builder has the right insurance and public liability insurance as a minimum. If something goes wrong on site and they’re not properly insured, the liability can fall to you as the homeowner,” adds Gray.
“Building work is often the second most expensive purchase you’ll make next to buying a house, insurance products are available to cover building work, should something go wrong.”
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