Premium hikes likely as rebuild costs rise
Homeowners could face increased buildings insurance premiums because of a hike in the cost of rebuilding a home, according to a report from the Society of Chartered Surveyors.
The latest Guide to House Rebuilding Costs shows that the national average outlay associated with rebuilding has increased by an average of 7.3% over the past 18 months.
There are regional variations with the cost in Dublin going up by 5%, while in the North West the increase if of the order of 9%.
However, the cost of rebuilding is still highest in the capital and lowest in the North West.
According to the figures, the cost of rebuilding a 3-bed semi-detached house in Dublin is €218,000, while the cost of rebuilding a similar house in the North West of the country is €140,000, a difference of €78,000.
While homeowners could see increases in home insurance premiums as a result of the higher rebuild cost, the SCSI warns that it is important that they are adequately insured.
“The reality of the situation is that if the rebuild cost of your home is €280,000 and you only have it insured for €210,000, in the event of a catastrophic event such as a fire, you will be facing a shortfall of €70,000,” Micheál Mahon, President of the SCSI, said.
“However, what a lot of homeowners don’t realise is that if in that situation there was a partial loss, which cost €80,000 to repair, the insured party would only receive €60,000 and face a shortfall of €20,000.
“This is because the homeowner in question has only insured their property to three quarters of its rebuilding cost,” he said.
As ever, it is imperative that householders shop around when renewing their insurance policies.
A report from the Central Bank last year concluded that dual pricing across motor and home insurance policies was more common than insurers had admitted.
Dual pricing effectively amounts to penalising policyholders who are loyal to an insurer with higher premiums than those offered to new customers.
Brexit and environmental costs
The SCSI attributed the increased costs of rebuilding mainly to issues associated with environmental standards and supply issues arising from Brexit.
New Nearly Zero Energy Building (NZEB) standards requirements have contributed to an increase in the upfront cost of building.
“If you’re rebuilding a house – or 25% or more of it – the ‘envelope’ or surface area of the home has to be bought up to a B2 BER rating,” Tomás Kelly, Chair of the Quantity Surveyors Group in the SCSI, explained.
“The envelope is the total surface area of the house which leaks heat, so it includes external walls, windows, doors, the ground floor and roof or ceiling. Replacing heat pumps, temperature control systems, heat recovery systems all add mechanical, electrical and plumbing costs to the rebuild process.”
Brexit is said to have resulted in supply issues with building materials and increased the cost of a range of products including insulation, timber products, steel, and plasterboard, among others.
Covid is understood not to have led to significant cost increases for one off residential rebuilds.