Should you renovate or buy a new home?
PYOU have lived in a home for a few years, love the area and are happy with where are, but the home no longer meets the requirements of a growing family. It’s time to make a decision - do you add on to the home you are in or buy another property that better suits your needs?
According to Adrian Goslett, CEO of RE/ MAX of Southern Africa, the decision to move or renovate is one that many South African homeowners will face at some stage of their lives. He notes that it is a decision that will largely be determined by various key factors such as whether the existing home has the necessary space for additional rooms needed to accommodate the family’s changing situation. There is also the question of affordability and which choice makes the most financial sense for the homeowner’s pocket.
“There is no right answer to the question as the deciding factors will be unique to the individuals and their specific situation, for each homeowner the choice will have to fit their lifestyle and circumstances. Many homeowners aim to remain in their home for a very long time and therefore purchase a property that they will be able to alter as their budget allows or their needs change. While other buyers purchase a home that is right for them at the time, but know that as soon as their situation changes they will have to relocate,” says Goslett.
There are advantages and disadvantages to either option, but there are steps that homeowners can follow to assist them in making the decision a slightly easier one.
“The initial step is for the homeowner to determine the value of their property, along with the estimated cost of the required renovation project,” says Goslett. “It is important that the homeowner factors in all costs involved in the project, such as the materials and the labour costs of the contractor. Homeowners will need to bear in mind that where projects affect the structure of the home they will be required to get a building inspector to sign off on the plans before ground is broken.”
He notes that as a general rule it is advisable to add an additional 10% to the renovation costs to cover any unexpected issues that may occur during the project’s construction. Once a ballpark figure has been determined, the homeowner will be able to compare the cost of the renovation versus properties they would be able to purchase by adding that amount to their existing bond amount. Depending on how long the homeowner has lived in their current property, the market and the home’s appreciation over time, they may have also built up equity that could be used towards the purchase of a larger property.
“Depending on the homeowner’s budget and requirements, it may be possible for a homeowner to find a property that meets their needs and some added extras such as an additional room, a double garage or proximity to good schools. Of course, there is the alternative that they don’t find anything within their price range, which points to the fact that it would be more feasible to undertake the renovation project. One way or the other, comparing apples with apples will help make the homeowner’s decision easier,” he says.
According to Goslett, a major concern when deciding to renovate a property is the risk of over capitalising. If the home offers more, but has become overpriced for the area in which it is situated, it may be very difficult to sell the property at a later stage. “It is vital to find out the average property price in the neighbourhood before renovating or adding to the home. If the renovation costs exceed the average house price, it may be quite a few years before the homeowner would be able to sell their property and recoup the money spent of the project. “That said, the decision to renovate or change a home is not always to increase the home’s value or for the purposes of resale. Very often the renovation is to improve the living conditions or lifestyle of the current homeowners — emotion is often a driving factor in the decision, not cost,” says Goslett. He notes that many homeowners would rather stay in the area for reasons that go beyond appreciation value, and as a result, choose to renovate. “There are several reasons that people choose to stay in a certain area, such as the fact that they grew up there and it holds sentimental value, it’s close to where they work or their children are settled and happy in the local school. “Many homeowners also enjoy the creative freedom and control that they have over a renovation project, such as choosing the materials or fixtures used,” he says. “While living through a renovation can be stressful and often disruptive to everyday life, moving to a completely new home is not without its own set of challenges and costs.” Goslett says there are pros and cons to both options, however, each provides the homeowner with the opportunity to move one step closer to owning their ideal property. –– Property24