Making the right choice when your home needs improving
Before you spend money on refurbishing your property think carefully about what really adds value to a home and beware the false improvements, says Sally Coulthard.
YOU don’t get owt for nowt. At least that’s what gran always told me.
And yet watching the property market up until 2008, you’d have be forgiven for thinking you did. It seemed extraordinary that you could simply buy a house, do nothing to it, and still watch its value accelerate beyond your wildest dreams.
What a different a few years makes. The days of mammoth appreciation seem a distant memory and most of us are left wondering where it all went wrong. And yet part of me (probably the Yorkshire part) is strangely pleased. Perhaps it’s some distant trace of Protestant work ethic or maybe even a touch of schadenfreude, but I’m glad that to make money from property most of us are going to have to do something constructive. In other words, we’re going to have to add real value to our property, rather than relying of the illusion given by a rising market.
But what changes really add value to a house? The online bank Egg asked two thousand homeowners which improvements they thought would add most value to their homes; most ranked a new kitchen, bathroom and a conservatory as the top three must-haves. Thanks to the myriad of TV makeovers it seems many of us imagined that a quick coat of paint and new bathplug would add a serious chunk to the value of our home. If only it were that easy.
It’s a well kept secret but most home improvements are actually a waste of money. While many of us are busy laminating our living room floors or installing UPVC windows, the reality is that we’re missing out on the most valuable additions to our homes. And when money is tight, it’s more important than ever that we squeeze the absolute maximum for any outlay.
So what’s the truth? While a new kitchen, bathroom or conservatory will add some value to your home (if they’re done well) they’re by no means the best use of your cash. Ongoing research studies, from organisations such as the Nationwide Building Society, show that time and time again, adding square footage to a house is the most sure-fire way to add significant value, in particular loft conversions, extensions and basement conversions.
Say you’ve managed to scrape together £20,000 to spend on one home improvement. What are your options? A good quality loft conversion, for example, can add about 15 to 20 per cent to the value of your home. Compare that to an all-singing-all-dancing new kitchen, which will only add a maximum of five per cent, and it’s easy to see why space wins out over sparkly new appliances.
There are huge provisos, of course. Numerous factors affect the inherent value of a property: age, location, neighbours, whether it’s detached and so on. Every house has a ceiling price regardless of how many improvements you make. The value you add to your house also depends on the quality and scale of the improvement.
Research also shows that there are things which have little effect on the value of your home. Timber decking (a staple of garden makeover programmes) and re-carpeting showed the worst value gain in the Nationwide survey. In other words you were unlikely to see any return on your outlay, although a new carpet certainly helps make a house more attractive during viewings.
As a nation, we’ve also been doing lots of things which actually devalue our homes. According to survey by Direct Line Home Insurance, homeowners in the UK spend about £150m per year on “improvements” which actually reduce the value of their house. Time-honoured turkeys include putting UPVC windows in period properties, carpeting kitchens and bathrooms and indulging in over-exuburant colour schemes.
At this point you might be thinking “yes, this is all good and well but why on earth would I be spending money on my house when the housing market is so dire”? Good question. The answer is threefold. First, adding inherent value to your property by physically improving or extending it will help to cushion the effect of a downturn in prices. Making improvements to a property, which add value beyond their initial outlay, always helps against the threat of negative equity.
Second, sticking your money in the bank isn’t going to earn you much interest at the moment. You might as well spend it improving your home, add some value and enjoy the space while you’re at it.
And third, thanks to the slump in house building, builders’ merchants and DIY chains are competing for your business. Stores have been offering up to 30 per cent off RRPS.
Putting your money into bricks and mortar needs to be just that. Forget relying on the notion of appreciation and start thinking about making your home bigger, better, prettier and more practical. It seems gran had it right all along.