To Restore or not to Restore Property in Le Marche – updated following the impact of the Crisis on the Local Market
This article was originally written when the full impact of the crisis had not become apparent. After 2 years, the bulk of the information remains valid with the exception of the prices of restored properties. As a consequence of this change our conclusion as to whether to restore or not restore has seen a complete turn around. The choice as to whether to restore or to buy a building that has already been restored is very often based on insufficient or biased information. In this article we will provide the information, most limited to the market in the Marche region of Italy, that is vital to making an informed and rational decision.
1. The Cost of Restoring Compared with Current Values of Restored Houses.
The average cost of a house in the countryside that needs complete restoration (substantial structural work, new services and all finishing work to a good standard) is a) €400 – €550/sqm (including purchase costs) with a minimum price tag of around €100.000. Published prices have hardly changed but discounts of up to 20% can today be gained during negotiation. The average cost of a complete restoration is b) €1200/sqm including tax and architect’s fees. For an example breakdown of costs see http://www.vinciproperties.com/market_information.htm#b1. The recent fall in labour costs is largely offset by the increase in material costs and so €1200/sqm remains a prudent estimate for restoring even in the present economic climate.
Buying and restoring therefore costs a) + b) = €1600 – €1750/sqm
The average cost of buying a ready restored house (with a better than average standard of finish) from a developer is €2000-2500/sqm. Whereas the average cost of buying a ready restored house from a private owner is €1600-25300/sqm (where the standard of finishing materials varies greatly).
Thus, buying a ready restored house can be less expensive than undertaking a restoration. The difference between the cost of restoration and the cost of a finished house is as little as €250 and as much as 700/sqm in the case of a developer whereas a private vendor might take a small loss of €100/sqm or could hold out for a profit of €900/sqm in the case of a particularly rare object.
2. The Importance of the Architect.
It is not difficult to understand how crucial to the successful outcome of a restoration the architect is when you consider what he or she is responsible for:
Design and planning, Recruiting the building company, Surveying, Project management
These four roles encompass just about all aspects of the restoration process and there is no doubt that finding a trustworthy and competent architect is essential to a smooth and, above all, cost efficient restoration process. The architect should be seen as auditor and first line of control as well as designer of the dream home. The question is, given the importance of the architect, is the risk of not finding the right one too great a risk to take? The answer would be yes if it were not for the fact that there are some safeguards already in place which any owner can take advantage of. Firstly, there exists an official regional price list (il Prezziario Regionale http://www.operepubbliche.marche.it/defaultprezz.asp?quale=generale) which is updated every year or so depending on global material and local labour costs. It therefore follows that a detailed set of plans and the consequent works specification will give an accurate end cost for the entire restoration. This in turn then provides a bench mark for costing plans, for judging quotations from building companies and for surveying.
Secondly, there are laws which stipulate technical build standards, covering all aspects of the structure and the services, that have to be met. If these standards are not met then the local Comune will not issue a “habitability certificate” (Certificate di Abiltabilità) and the house cannot be legally lived in.
Thirdly, the architect is legally responsible for all technical decisions that are made and remains so for 10 years after the work has been terminated.
These safeguards do not entirely make up for the lack of an honest and competent architect but they do go a long way to helping control the main elements of the process and to determining responsibility were problems to arise.
For each horror story of a restoration gone wrong, there are many of successful restorations and happy owners. The trick is to tap into the network of owners that have already been through the process before and ask for recommendations of tried and tested professionals. This, combined with the safeguards mentioned in this short chapter and the owner’s prying eye, will make the restoration just about as easy as it is anywhere else in the world.
3. Controlling the Building Process from Afar
Quite apart from communicating regularly with the architect (see above), there are other ways of keeping an eye on progress, making sure that costs are controlled and that important decisions are not being made in the owner’s absence.
Firstly, there are a number of project management companies, such as Treehouseitaly, that will not only manage the restoration process on your behalf, but that will also convey in precise terms the essence of what the owner is aiming at – this can be very difficult to do without fluent Italian. A project management company will be at pains to make sure that the owner is kept abreast of developments and that tiresome problems are dealt with so that during a visit the owner can use his time efficiently.
Secondly, there is an increasing number of building companies that employ digital technology to keep clients informed of progress. Take for example Panichi Srl, a building company from Ascoli. On their web site there is a page, reportage, dedicated to each building site with options to see progress by clicking on any specified day or week. To take things a little further, Panichi Srl will also do a live webcam report whilst walking around the site. This means that individual problems can be handled without interrupting work in progress.
Clearly, the owner’s presence on site is essential when the restoration is in its final phase and questions of style and taste of finish arise. But with a good team of professionals much of the restoration process can move forward without owner intervention, especially in the early stages where only good technical knowledge will allow any sort of worthwhile contribution – how many owners, for example, know enough about underpinning to be able to judge work well done or not?
Finally of course, owner control is underpinned in the contract agreed with the building company. A well written contract will give the owner financial leverage (no payment until work is satisfactorily complete) and will include a clause on procedure in case of unforeseen issues.
4. A summary of the pros and cons of restoring.
Contrary to our advice when the market was buoyant, we now believe that it makes better financial sense to buy a restored property rather than a house to restore. Quite apart from the negligible difference in costs, in the case of the restoration process one should factor in both the potentially damaging and fluctuating exchange rates and the costs of overseeing the work (flights, hotel bills etc).
That said, when buying a restored property it is most important that a thorough survey be carried out. This may seem obvious, but it is curious to note that whereas surveys are normal practice “at home” very often they are dispensed with when abroad in the name of simplification. Since the Aquila earthquake 2 years ago, building standards have become very exacting and the danger is that a routine piece of structural maintenance may also require the redoing of foundations and supporting walls. There are, however, many conscientious structural engineers who, for a few hundred euros will provide the necessary report.
Perhaps though, the crux of the matter is style. The question of whether or not the currently available selection of restored houses for sale includes the “right” house is all important. The Marche property market aimed at sophisticated foreigners is relatively immature when compared with Tuscany and Umbria and the prevalent style of finish, although generally very well executed, tends to be rustic – most developers turn out a standard traditional finish (terracotta floors, wood beams and white walls) and, for lack of experienced architects, most private owners played safe and followed suit. If you are after a more contemporary feel then the choice of finished houses on sale is limited.
At this point, it would be useful to introduce a little known third option, the turnkey property. Priced somewhere between private vendor and developer prices (€1750-€2200/sqm for the finished house), this option enables the purchaser both to dictate the style and to obtain a guaranteed final price so eliminating the potential danger of unexpected cost increases that inevitably occur during the restoration process. Turnkey projects are not very widespread and are usually sold by developers or far thinking architects that have entered into agreements with private vendors that are contractually bound to sell their property along with the wreck-to-restored package.
