Renovating a house: calculating and financing the costs

Renovations offer many advantages. As well as improving the quality of living, they can also increase the energy efficiency and the value of a property.

In general, a distinction is made between value-preserving and value-enhancing renovation. What does that mean? Houses age over time. This is partly due to wear and tear. The older a residential property, the greater the need for renovation. Renovation work has to be carried out to maintain the value of the house or apartment. This is value-preserving renovation.

Secondly, the fittings in older houses – 50% of Swiss residential properties are more than 50 years old – no longer reflect the current state of the art and modern levels of comfort. If you equip your bathroom with a whirlpool and sauna, these are value-enhancing renovations. They are not deductible on your annual tax return.

Nevertheless, value-enhancing renovations can still be worthwhile. If you decide to sell your residential property, value-enhancing investments can be deducted when determining the taxable real estate capital gains. This means that you will ultimately still save taxes, in the form of a proportion of the real estate capital gains tax.

How much will it cost to renovate your property?

When calculating the costs, you should not only take into account the necessary renovation work, but also factor in your individual conversion plans. Clarify the extent of your renovation project right from the start. Do you simply want to carry out the most urgent work, or are you aiming to improve the quality of your property?

Then you can determine what materials you will need to use and find out how expensive they are. You should also check the service life of certain components, so that you know when they will need to be replaced.

You can save costs by taking matters into your own hands. If you have sufficient manual skills, you can take on some or all of the work yourself and will only need to invest in the materials. If you are not very gifted when it comes to DIY, you will have to pay to entrust the work to tradespeople.

You should also monitor the market situation. There are phases when the necessary materials will be less expensive. You can save money if you time things well.

If you want to carry out extensive renovations, you may have to move to other accommodation for the duration of the work. This will involve additional costs.

Work on historic buildings may be subject to specific conditions or may require the use of more expensive materials.

When renovating an older building to make it more energy-efficient, insulation and heating are the top priorities. Good insulation is essential for the use of certain types of heating systems.

Insulating the building shell is often very advantageous, but is unfortunately also quite costly. According to the specialist portal Houzy, a comparatively thin façade insulation of 14 cm costs between 250 and 300 francs per square meter. For 18 to 24 cm, the cost can rise to around 330 francs per square meter, or even as high as 400 francs for a thickness of 30 cm.

Another typical way to increase the energy efficiency of a building is to replace old windows. A standard, triple-glazed window costs between 600 and 850 francs. Of course, the actual price will depend on the size of the windows and the material used. Plastic windows are less expensive than wooden windows, for instance.

Roof insulation greatly depends on the roof construction and the size of the roof. Houzy estimates a cost of 25,000 to 60,000 francs for an ordinary single-family house. If a photovoltaic system is installed at the same time, an output of 10 kilowatt-peak will add around 25,000 to 30,000 francs to the bill.

As well as carrying out energy-efficient renovation, regular work is also needed on kitchens and bathrooms. A basic kitchen renovation costs around 20,000 francs. However, it can also work out much more expensive depending on the size and quality.

The estimated cost of a simple bathroom renovation is 2,000 to 2,500 francs per square meter, or 3,000 to 4,000 francs for a renovation of average quality.
Property owners are therefore well advised to make provision for future renovations. UBS recommends saving between 0.7 and 1% of the value of the property each year. This depends on whether or not a renovation backlog has built up.

Hidden renovation costs and unexpected expenses

Every renovation carries the risk of hidden and unexpected costs. These are costs that are often overlooked or that come as a surprise. Before carrying out renovations, you may need to obtain a number of fee-based permits or complete the time-consuming process of obtaining the consent of other owners, for example if the new windows will considerably alter the appearance of the building façade.

You must also take into account any disposal costs or the travel costs of supposedly inexpensive tradespeople that were “forgotten” on their quotes, but remembered later on. Hidden construction defects which only become apparent during renovation are a particularly high risk.

It is therefore difficult to give a general answer about the costs involved. Although a rough estimate can be drawn up, it is advisable to set aside a reserve for the overall budget.

Plan renovation costs realistically

Draw up a long-term strategy for renovation, maintenance and refurbishment work, and take it into account in your individual financial planning. As a future property owner, you should always try to realistically estimate the potential renovation costs before buying a property. If you are about to buy an older property in particular, it is worth estimating the expected renovation costs before you decide to go ahead with your purchase.

This will not only allow you to calculate costs more easily and realistically but will also provide you with a reasonable basis for negotiating the purchase price and conditions. If you need help estimating the costs, it’s a good idea to consult experienced specialists for advice. If you know what to expect, there will be no nasty surprises, and you can enjoy your home with peace of mind.

Careful planning can save you money. Costs can be divided into the following areas:

Value-preserving expenditure

Renovation and maintenance costs are deductible from your taxable income if they maintain the value of your property. Examples include replacing old windows, maintaining the garden or carrying out painting work.

Energy-efficient renovation

Although energy-efficient renovation increases the value of a property, the costs can still be claimed against tax. The amounts can even be used to reduce your tax burden over the next two years.

Flat-rate deduction

If only minor maintenance and renovation costs are incurred in a year, you can still benefit from a flat-rate deduction from your taxable income. The federal government and many cantons deduct 10% of the imputed rental value for recent properties and 20% for older properties.

Staggering major renovations

Major renovation work that can be planned in advance should be spread over several tax periods if the total cost exceeds the flat-rate deduction. This will allow you to break the tax progression. Divide the work between different renovation phases or have it carried out over more than one year. Ask for a separate invoice for each year. In most cantons, it is the invoice date that determines which period renovation costs should be allocated to.

When it comes to renovation work, a distinction is made between value-enhancing and value-preserving renovation. Value-preserving renovation work can be claimed back against tax. The same is not true of value-enhancing renovation work, with one exception: the costs are deductible if the increase in value achieved by energy-efficient renovation protects the climate and improves energy efficiency.

In general, detailed planning is important in order to be able to calculate the costs as accurately as possible. Essential renovations should not be put off indefinitely, as this will only drive up the costs later on and reduce the value of your property.

We will be happy to discuss the options for financing your renovation projects with you during a personal consultation.