🔨 The Cost Shock - Case Study 2

Tuesday 18th October 2022

Material and Labour Volatility

High Barnet, EN5 5

The £50k Budget Blown: Price Increases Kill Margins on Potters Road

By late 2022, the easy profits were over. The Bank of England Base Rate had climbed from 0.10% in early 2022 to 3.00% by November 2022, increasing bridging finance costs, but the real killer was inflation in building materials and labour.

Case Study 2: The Margin Squeeze

Property: Small terraced house requiring full strip-out, Potters Road (EN5 5).

Bought: January 2022: £450,000.

Original Renovation Budget: £85,000.

Actual Cost (Oct 2022): £135,000 (due to plasterboard, timber, and fuel costs rising 30%+, forcing labour rates up).

Sold: December 2022: £610,000.

Result: The gross profit (£160,000) barely covered the vastly increased build cost, finance charges, and the high SDLT rate now applicable (around £31,000 including the 3% surcharge for second homes).
The investor walked away with a minimal profit—a clear indicator that the market had shifted from being driven by House Price Growth to being suffocated by Cost of Construction.