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Buyers love ‘Inflationary wrecks'
Why are buyers seduced into paying top prices for houses that might have foxes living in the kitchen...?
When you go to view a £3.5 million home, you expect the odd luxury.
What you don't anticipate are the words "in need of modernisation" discreetly inserted on page two of the details. A rundown terrace house in Notting Hill, on sale for this eye-watering amount, is being marketed as an opportunity to "create your dream home", and unmodernised in this case is an understatement.
A fox has taken up residence in the kitchen, the drawing room walls have been charred by fire and the jungle at the back will need more than a quick prune.
It will require a minimum of £500,000 to get the place up to scratch: £1 million and then some is more likely.
Welcome to the world of inflationary wrecks, where buyers shell out vast sums to get their hands on ruins that require a great deal of attention and cash.
A runaway problem
If you think this is simply a London anomaly where City bankers can afford to throw money at rubble, think again. The Society for the Protection of Ancient Buildings' (SPAB) list of ruins in need of rescue highlights this runaway problem.
Wallington House at Runcton Holme, Norfolk, described as a "glorious mellow brick house dating back to the early 16th century with later additions", costs £5 million and Stanwick Hall in Northamptonshire £1.1 million. It is estimated that half a million pounds is needed to carry out "considerable work" on this Queen Anne hall, which could spiral into a far higher figure.
"Along with people being deterred from buying a listed wreck if the price they are asked to pay for it is high, we have concerns about buying at auction, which distorts values and encourages people to bid for period properties without first asking the right questions," says Philip Venning at SPAB. "In many cases, this proves detrimental to the integrity and future of the property."
SPAB also worries that owning an older building has become "aspirational rather than a housing necessity" in many places. "As well as taking these properties beyond the range of local buyers, unreasonable expectations are put on the fabric of listed buildings as they are 'moulded' into something they were never intended to be."
Derelict premium
Agent Michael Duke of Winkworth reckons a "derelict premium" exists for houses that are reasonably intact. However, as a caution he advises aspiring wreck owners to "buy at the level where they feel comfortable at the time".
In the current climate with the market slowing in many areas, is it a risk paying over the odds for a ruin and going over-budget to resurrect it? Richard Donnell, head of research at Hometrack, thinks it is.
"In a hot market the differentiation between prime and secondary homes narrows. But when things soften, people are less certain and the value of tertiary property like wrecks unwinds."
With all the strong growth coming out of London, Donnell says price growth in six out of 10 English regions is less than inflation. "It has reached the point where people are trying to push prices too far. I would advise anyone buying a wreck not to rush into it."
Fashionable to ‘do up a wreck’
House-finder Jane Perks from Stacks Property Search & Acquisition in Herefordshire, Shropshire and Worcestershire (01594 842880) says wrecks have gone up 40 per cent over the past five years.
She says a big problem is owners dividing up farmyards to build and sell off as many homes as they can. "You end up with someone right on your door-step, which defeats the whole point of moving to the country."
It has become fashionable to do up a wreck, with numerous television programmes encouraging us to do so, believes James Greenwood, Managing Director of Stacks. "All an agent has to do is generate a bit of interest, go to auction and watch people fight to lay down their money - and often, a good chunk of their lives."
There is a simple formula, he says. "Estimated current market value when done, minus renovation costs equals the price you pay for the wreck. Everything else represents a 'must have' or 'fantasy' factor."
Source – The Telegraph
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