When you buy a property, the house itself, stamp duty and legal fees are only the beginning of the expenses you face. Then come the creeping, often unbudgeted costs of renovating your home the parquet flooring, the designer kitchen, perhaps an indoor swimming pool. But owners who splurge on improvements run the risk of overcapitalising.
The truth is that only a handful of enhancements add real value to a house. ‘When the property market is rising, as it did until the end of 2007, you can get away with anything when renovating,’ says David Adams of Humberts. ‘People sold their home, then thought they had made a good gain out of their renovation, but, in truth, they would have made a gain even if they hadn’t done anything.’ However, in a falling market one ‘where you make more money when you buy a house, not when you sell it’, as Mr Adams says only genuinely valuable improvements bring a return. Enhancement dos To make good on your renovation investment, you need to follow professional developers and ‘convert your property to a higher and better use,’ says Mr Adams.
This means ‘buying a three-bedroom home and making it into a four-bedroom one; putting in a second property in the grounds; or turning a negative say, that you can see the road into a positive by adding some good screening.’ It’s also of paramount importance ‘to carry out repairs to the bare bones of the property,’ according to Rupert Sweeting of Knight Frank. ‘Each house normally needs a makeover every 30 years that includes new electrics and new plumbing, so these things should be tackled early on.’ Other areas that seem to be showing a return are ‘more energy-saving, Green adaptations, such as using geo-thermal piping for heating,’ says Mr Sweeting.
And don’ts Anything else is unlikely to generate any meaningful gain, Mr Adams says. In particular, he urges, ‘don’t overcapitalise on kitchens, bathrooms and fixtures you don’t need a brand name, or ultra-modern fittings’. Owners need to be ‘sensible’ about what they choose to do and how much they invest on it, agrees Nigel Maclean of Calcutt Maclean Wood. ‘A good-sized kitchen family room may enhance the value of your house because it’s a popular room for current living. But you need to be quite sensible about how you do it don’t go over the top.’ Mr Sweeting quotes a couple of figures to illustrate this point. ‘You shouldn’t spend £120,000 on a kitchen, you should consider spending £30,000. Similarly, you can do a decent bathroom for up to £10,000, rather than £30,000.
The cost of putting in a swimming pool can range from £40,000 to £100,000 and won’t give you a big return.’ As for finishing the house, he adds, ‘rather than spending fortunes on carpets and curtains, together with wallpaper, do a more simple finish and save money. There’s every chance that, in the future, a buyer will come in and rip all of it out’. Worse, there are some expensive finishings that can actually reduce a property’s value. ‘Something highly individual may be detrimental,’ explains Mr Maclean. ‘Buyers will think they have to pay for something that was clearly costly but which they don’t like.’
And because collective taste changes over time, to recoup your investment you need to stay on top of home—decorating trends. ‘We’ve seen plenty of properties made modern with minimalist design beige walls, glass, steel and minimalist modern furniture,’ Mr Adams explains. ‘They look very bling, but we’re already seeing evidence that this style is no longer fashionable at the moment, the market is flooded with magnolia interiors and ultra-modern furnishings, and no one wants them.’ Does this mean that you should forget the swimming pool your children really hanker for? Of course not, says Mr Adams but you can’t really count it as an investment. ‘Don’t do it, unless you do it for your own personal enjoyment.’