Renovation values

ARTICLE Deborah Carlyon

In this age of peaked house prices, worldwide austerity measures, and sluggish markets, renovation consents have remained astonishingly stable as families adopt a back-to-basics attitude and seek creative ways to use existing space. 
There’s been a noticeable mood change in the housing market. Trading up and property profits are no longer the main topic of barbecue banter. They’ve been replaced with global financial crisis, Euro zone debt problems and austerity measures – hardly confidence inspiring buzz words. And – as if that’s not enough – over the last three years house prices have fallen five percent in real terms (excluding inflation). 
For most of the 2000s, property seemed a one-way financial bet. House prices peaked in 2007 after increasing almost 200 percent in real terms from 1990. Few worried about renovating or moving house, confident that their house price would rise to more than cover the expense. Now the market is sluggish with volumes of sales down 20 percent year on year and prices are flat. Interest rates are low yet the housing recovery is non-existent. It remains constrained by structural issues such as households reducing debt, low affordability, job security worries, tax changes for rental property and low net migration. With houses no longer a sure-fire way to make money quickly, you might think twice about moving house, building or renovating. Indeed building consents for new homes have fallen by a third since 2008.
But renovation consents have remained remarkably stable as home owners decide they’ll work with what they’ve got. And the new austerity mood has created a back-to-basics attitude. Growing families may need an extra bedroom and a kitchen from where the children can be seen playing in the garden. Opening a living room to a new sunny deck area creates more space and passive solar benefits. Creating a separate room for computer use or working from home, reflects changing lifestyles including space for young adults to stay home during the university years.  
Improving the flow of spaces, creating storage and enhancing functionality are back in focus for renovations replacing what were sometimes status-driven statements such as extra large glossy kitchens and third or fourth bathrooms.
Today’s thinking is less about size and more about creative use of existing space. This could be combined with maintenance needs – a new roof may provide a cost effective opportunity to use the loft space for an extra room. Or in my own case, a re-piling requirement for a draughty 100-year-old villa on a sloping site which led to a major excavation. The result was more living space, an extra bedroom, better insulation, a stronger house, and an internal double garage in a densely populated inner city suburb – and a more fulfilling exercise than routine maintenance. Yes, it was also significantly more expensive than new piles however the key is to weigh up the value of the improvements before you start.
Value isn’t only about whether your house will be worth more at the end of the exercise. You are unlikely to be selling immediately so most renovations will primarily enhance the quality of your lifestyle. A warmer, drier, healthier home has become top of the list and as 70 percent of New Zealand homes were built before insulation became mandatory in 1978, there is considerable scope for enhancement. According to BRANZ, the most common consented renovations are still garages at 30 percent, followed by deck, bedroom and bathroom renovations at around 12 percent each. But more commonly people are including under floor insulation and ceiling insulation, followed by double glazing, wall insulation and heat pumps.
In this way, the cost of renovation may be partially offset over a longer timeframe by the home being cheaper to run. And with families staying put longer in their comfortable improved homes, local communities are more stable.
It seems that renovating is now measured not by short term financial gains but by solid traditional values.

You might be interested in reading: How to add value to your home.

This article by Deborah Carlyon featured in Issue 001 of New Zealand Renovate Magazine. New Zealand's first and only magazine solely dedicated to home renovations.

 

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