EYEING UP CHANGE: Want to fix up your house rather than move? Make sure your rennovations make you house better – not worse.
New Zealanders spent more than $1.4 billion on residential alterations, additions and out buildings last year.
That’s a lot of sheds, extra bedrooms, new kitchens and depending on where you live, swimming pools.
In a flat construction sector this category saw the biggest growth for pre-GST residential construction spend in 2010 according to Statistics New Zealand, rebounding from decreases in the two previous years to book a 9.2 per cent boost worth $121 million and the highest year end result since 2006.
The residential splurge peaked in the June quarter with almost $400m spent, the highest quarter spend for residential alterations since the end of 2007.
And these figures don’t include jobs worth less than $5000 or those glorious small scale DIY projects Kiwis love to have a go at.
Anecdotally some real estate agents and builders reckon that the rebirth of renovations is a result of the recession and torpid real estate market as Kiwis stay put and do up, rather than sell up and move up.
Or, it could be just that innate desire Kiwis seem to have to “do something” to a house, Morgans Property Valuations’ Paul van Velthooven says.
So, you own a house and you desperately want to “do something.” As Dennis Hopper’s explosive baddie character in the movie Speed said to great effect, ‘what do you do? What do you do?’.
Because if you get an alteration wrong, spend too much or simply do something to the house that doesn’t make any sense, your ideal alteration can blow up in your face and vaporise not just your cash but also potentially the property’s value.
The dos and don’ts
There are no absolute winners or total duds when it comes to renovations – except for in the US.
Research in America found that steel front doors – yes, steel doors – are a sure fire winner in the states recouping over 100 per cent of their cost when a property is sold.
Unfortunately there’s no Kiwi version of the steel door, but there are some ways to determine if you are getting value for money and to avoid making a whopping mistake.
Firstly, analyse your motives for committing to a project.
Do you want to do something that adds value to the house? Do you need to add more space for your family? Do you want a pimping spa pool just because you’ve always wanted one?
Each of these reasons are legitimate but should be approached with the usual caution.
Try to be dispassionate – getting emotional is a big mistake.
Make sure you understand what overcapitalisation is in order to avoid it. In short, it is spending more money on an alteration than you can make back when you sell.
A general rule of thumb is to spend no more than 25 per cent of the value of your house on renovations.
Another oft-quoted rule of thumb is to factor in a cost of $1500 per square metre for basic building work.
Also think about how you want to live in your house.
If you’re settling up for the long haul then that spa you’ve long-lusted after but that won’t do anything for your home’s value, probably is a good idea after all.
But if you’re planning on shaping up and shipping out sooner rather than later, the cost and upkeep is unlikely to be worth it.
Tommy’s real estate agent David Platt says once you’ve established what it is you want to do, as with all property deals, do your research in order to dodge a costly error.
Check out other properties in your area. Are they mainly four bedrooms? Do they have big garages with multiple covered car parks?
Thinking about adding that fourth bedroom in keeping with the neighbourhood? You have to consider how this alteration will fit in with the rest of the house, Platt says.
If you add another bedroom and bathroom but leave the living areas small, the house will feel out of proportion, he says.
“I have seen plenty of alterations over the years that weren’t in keeping with the rest of the house. This doesn’t appeal to the market.”
Before you get work underway, or even working drawings, Platt reckons it’s a smart idea to call in an expert, be it an agent, valuer or architect.
They will help you determine what the project’s cost versus the potential gain in price for the property. And if the numbers don’t add up, don’t go ahead.
But in order to get the go ahead from the bank you may need to talk to someone like him anyway, van Velthooven says.
He says projects upwards of $25,000 which need bank funding sometimes require a valuer’s opinion before the bank will sign off on a loan.
“If it’s $10,000 you probably won’t need to worry but if it’s $110,000 you will have to. This is piece of mind not only for the bank, but also for you that what you are doing is financially sound.”
A classic example of an addition unlikely to add value in the Wellington market is swimming pools, Platt says.
He says you would be unlikely to recoup the rather hefty cost of an in-ground pool because for obvious weather-related reasons they’re just not sought after.
So what does he recommend? Not much really.
He says if you’re looking at flicking on a property quickly, say in less than a year, don’t do anything at all.
Platt recommends keeping your renovations cosmetic if possible.
“It’s amazing what a paint job can do,” he says. Providing it’s not fluoro-orange with pink polka dots.
“People can get carried away,” van Velthooven says.
“Odd design, colour choices or over the top fittings don’t necessarily add the value you may have expected.”
So there is no hard and fast rule when it comes to successful alterations and renovations except for not doing something crazy, thinking hard about value before you make any moves, and consider is that the address you want to grow old at.