More homeowners are opting to stay put and do up, rather than up sticks and trade up, but how can you be sure your renovation will pay off?
Across city skylines, the crane tally is testament to the number of major construction projects underway. On the ground, it’s the rising skip count on suburban streets that’s revealing changes taking place in the residential property market.
As investor and first-home buyer activity has risen over the past three years, owner-occupiers have become increasingly reluctant to move. Despite low interest rates and cooling prices, the percentage of buyers who are moving house has fallen from 30 to 27 percent since 2016, according to CoreLogic data – just a smidgen above the 26 percent recorded earlier this year which represented their smallest market share since 2009.
Meanwhile, figures from Statistics New Zealand last year revealed that building consents for alterations to dwellings across New Zealand had reached their highest level since at least 1990.
The numbers point to a growing trend which is seeing homeowners stay put and invest their resources in their existing home. But how can you be sure your investment will pay off?
“Whether you’re renovating to flip, or renovating to stay, it’s important to have one eye on the future,” says Bayleys’ national residential manager Daniel Coulson.
“When renovating, your options are endless, but it’s always important to consider the length of your ownership and the fundamental reason you’re renovating. Is it purely for profit, or for enjoyment while you own the property? The answers to these questions should have a significant impact on the quality of a renovation, and the degree to which you personalise it.”
Lap pool of luxury?
When spending large on renovations, personal luxury choices cannot generally be counted on to attract big returns on sale day.
While adding a pool will make you popular with neighbourhood kids, it’s unlikely to make much of a splash beyond a relatively small set of prospective homebuyers.
“Few people are in the market for something as specific as a pool, or other luxury features such as bar areas, spas and man caves,” says Coulson.
“While features like these will, of course, add value to your home, their true worth may often be more about your own enjoyment of them. Their value beyond that often depends on the area.
“The key to avoiding overcapitalising is to take a look at the type, condition and value of property selling in your area. Always consider the location of the home you’re renovating.”
Before you commit to any major work, it pays to check out recent sales in your neighbourhood. “Regardless of what you spend on improvements, your home’s value will always be related, to a large extent, to the prices achieved for comparable homes nearby,” says Coulson.
Bang for your buck
“With any property sale, achieving the best price means appealing to the greatest number of potential buyers. To maximise the return on your renovation, focus on what most people want in a home: things like space, light and modern styling.”
Coulson suggests focusing on the things that are most obvious to buyers. “Kitchens and bathrooms are always important. But also, are you in a family area with popular schools? If so, additional bedrooms and bathrooms are key selling points.”
For any renovation project, functionality is king. If it greatly improves a home’s liveability, it offers the best chance of paying for itself in the long run.
Opening up a wall and adding a bi-fold door to create flow onto a deck is expensive, but can give a big lift to day-to-day living. The same goes for improvements to kitchens and bathrooms, as they’re areas that get a lot of use.
Little things can have a big impact too; you don’t have to spend a fortune. Paint is cheap, and fixtures from your local DIY store serve the same purpose as expensive, designer imports.
“The value added by fresh neutral paint and carpet can be considerable,” says Coulson. “But it’s important to remember that not everyone shares the same tastes, so ensure your home’s appeal is as broad as possible.”
When choosing projects and deciding how much to spend, it pays to keep an eye on potential returns. If it’s well spent, money invested in your home today will benefit not only your current lifestyle, but your future sale price.