The cost of rebuilding a house has risen by 21% in the past year, according to the Society of Chartered Surveyors Ireland, with the biggest increase of 26% coming in the North-West.

Dublin, which already had the highest rebuilding cost, recorded the lowest rise at 14%, while elsewhere the increases ranged from 17% in Cork to 18% in Limerick and 19% in the North-East. In Galway the increase was 20%, while Waterford had the second highest rate of increase at 24%.

The SCSI said it was important to note that the specifications and designs used for the six house types had been updated this year and that as a result not all the reported increases could be attributed to construction inflation.

SCSI spokesman Kevin Brady said rebuild costs had increased due to supply chain difficulties and increases in the price of building materials.

Brady said: “Although pricing pressures on certain materials such as timber, plasterboard and insulation have eased slightly, rising fuel and energy costs are continuing to affect the supply chain, leading to a sustained increase in the price of energy intensive materials such as concrete, aggregates (infill material), steel and paint.

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"Coupled with these material price increases, ongoing labour shortages show no sign of abating and are also pushing up rebuild costs.”

According to these figures the minimum base cost of rebuilding a three-bed semi in Dublin is €268,000, (98sq m x €2,735) while the minimum base cost of rebuilding a similar house in Waterford is €225,000 (98 x €2,298), a difference of €43,000.

Brady said the last rebuild guide had been published 17 months ago, and since then rebuild costs had increased by an average of 29%.

He said this underlined the need for homeowners to review their house insurance.

He added: “Homeowners need to ensure their house is adequately insured so that in the event of a total or partial loss situation, i.e. a fire, they are covered under their insurance policy when reinstating or rebuilding.

"Rebuild costs for a three-bed-semi, the most common house type in the country have increased from between €42,000 to €56,000 depending on where you live.”

“While these increases are considerable it does not necessarily mean the premium will increase significantly and consumers should shop around when seeking insurance cover for their homes.

“The really important takeaway from this for homeowners is to set aside some time – it should only take five or ten minutes if you use the SCSI Home Rebuild Calculator, which is free – to get an accurate reinstatement figure and ensure your home insurance is up to date. If it’s not you need to contact your home insurer.”

Rising under-insurance

The Central Bank, in a review that echoes Brady's concerns, says there is increasing evidence of under-insurance in the home insurance space, and that the level of under-insurance rose from 6.5% in 2017 to 16.5% last year. It said that not all firms are giving sufficient attention to highlighting key risks to consumers and that they must take further action.

The bank has written to insurers expressing its concerns.

Its review found:

• Under-insurance in the home insurance market has been steadily increasing over the last five years, from an average of 6.5% of paid claims being under-insured in 2017, up to 16.5% in 2021.
• For those that have had their claim reduced due to under-insurance, the average reduction in the claim payment was approximately 19% in 2021, meaning that those customers would have incurred substantial costs to fully meet the cost of their claim.
• There are differences in the way insurance firms present and provide key information to consumers. Firms do remind consumers of the need to review their sum insured; however, more could be done by firms to highlight the practical consequences of under-insuring their home.
• Some firms have proactively identified the risk to consumers, and have taken some steps to help mitigate the risk of under-insurance; however, all firms must take action to effectively mitigate the risk to the consumer.

The Central Bank said that it expects insurance firms to:

Communicate the risk of under-insurance to customers in a clear and understandable way, including by: 

• Writing to all home insurance policyholders explaining under-insurance;
• Setting out the implications of being under-insured, the reasons why this is currently a heightened risk and how policyholders can better estimate the adequate sums insured value;
• Providing clear examples of the consequences of under-insurance; and
• Treating the risk of under-insurance as ‘key information’ and disclosing it as such to customers.

Better manage the increased consumer risks, including by:

• Using the data available to them to identify and act on the risks associated with under-insurance and take action to protect consumers’ interests; and
• Strengthen their product oversight and governance of home insurance products to regularly assess whether products meet the needs and expectations of customers.

Director of consumer protection Colm Kincaid said: “The Central Bank encourages consumers to check that they have adequate home insurance cover in place when renewing or switching their policy. When reviewing home insurance cover, consumers should not focus on the premium alone but also on the level of buildings and contents cover that is currently in place to ensure it remains appropriate.

"These details should be reviewed regularly, checking with their insurer or broker as appropriate, to avoid the risk of receiving a reduced payment in the event of a claim."

Penalties for under-insurance

SCSI president Kevin James added that homeowners who are not adequately insured may be penalised under their policy by having to pay a certain proportion of the reinstatement costs.

He warned: “Where the insured sum is only 75% of the total reinstatement cost, you will only receive 75% of the agreed cost of reinstatement, whether the claim is made for partial replacement or total loss.

“For example, in the case of a house insured for €270,000, where the total reinstatement cost was €360,000, the insured party would receive only €270,000 to reinstate the house in the event of the total loss. In that situation the insured party would be obliged to provide the balance of €90,000. This is something many homeowners may not be aware of.

“It’s also important that homeowners reassess their cover to take account of any changes such as home office extensions or garden offices. These have become increasingly popular with more people now working from home, but they need to be included in the house insurance.”

Homeowners will find the House Rebuilding Calculator, together with the 2022 Guide to House Rebuilding Costs, on the SCSI website here.

The institute points out that its Report on Construction Costs for the Defective Concrete Block Grant Scheme, the Mica Report, and the current Home Rebuild Guide differ in respect of rebuilding costs because the cost calculations for the mica scheme were based on building regulations and standards from before 2007.