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Contemplate before you renovate
Property 24.com
09 September 2008
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In order to sell a home these days, owners need the property to outshine
the competition and also need to be very patient as well as highly
negotiable on price.
Consequently, says Dr Piet Botha, chairman of the Nationlink estate
agency group, it isn't surprising that many are shelving their plans to
move and deciding instead to extend or improve their existing homes.
"If you're settled close enough to work, your children are happy in
their school and you like your neighbourhood, there's a big attraction
in staying put and just altering your current home to give you the extra
space you need or the new finishes you want, especially when you also
consider the upheaval and additional costs associated with moving."
But, he says, current market conditions should make you think twice
about renovations.
"Clearly, with home prices now rising much more slowly than during the
boom years and even stagnating in some areas, now is not the time for
most people who bought in the past two years to be thinking about major
additions and alterations. They will most likely not have a lot of
equity in their homes and the value will just not rise fast enough in
the near future to cover a big outlay on top of what they already owe on
their bonds.
"It is thus quite likely that their homes would end up being
overcapitalised for quite some time – that is, being worth less on the
open market than the amount that has been spent on them – and this is
only a risk worth taking if you are sure you are going to stay put for
the next five to 10 years."
On the other hand, he says, if you have already owned your home for at
least five years and benefited from the big increases in values from
2003 to 2006, you may well be in a good position to make extensive
improvements.
"What it comes down to in this case is weighing the costs of moving
against the estimated renovation costs, and also taking a clear-eyed
view of the non-financial benefits of moving or staying, such as the
quality of schools in different areas or the convenience of a shorter
commute.
"And finally, whatever the state of the market, you do need to take
expert advice on whether your planned alterations will actually add
value to your home. You may fancy a gourmet kitchen, for example, but if
that is out of character with most homes in your area, it may be a waste
of money no matter when you put it in."
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