Renovating Guide

Depending on your motivations for renovating, you could be looking at a few changes or a complete overhaul. It is important to make sure you are going to get a good return on your investment especially if you are looking to renovate to sell in the near future. Significant investment might turn your home into your castle but if you are looking to recoup that investment when you sell it is good to know how much to invest where.

 

What adds the most value to your home?

It is the kitchen and bathroom that will deliver the most increase in value from a renovation project but you always have to keep in mind the home and property, and the location.

Whether or not “high specification” adds value varies. If you put in a $30,000 bathroom or kitchen, whether it will add the same amount of value to your home as you spend depends on the home and the neighbourhood. The kitchen and bathroom are a good place to spend money but you can overdo it.

Spending money on kitchens and bathrooms will usually add value to a home. But if you want to know whether to spend $10,000 or $30,000 on your bathroom makeover you need to consider the overall value and location of your home. On a higher priced property you are likely to add at least the value of a ‘high spec’ bathroom but at the lower end then you might be better to spend $10,000 instead. A modern kitchen that doesn’t break the bank will still add value to a home. But if you spend $40,000 on a kitchen in a modest home, you may not get the same value back.

What about insulation and heat pumps?

Insulation and heat pumps are expected today. If your home does not have insulation or heating it may detract from the value so this is a good investment and will usually add some value. Solar panels could result in an increase in value but it is difficult to quantify because cost and value are not the same. You also need to consider what benefits the solar power brings and whether these benefits will be returned over a long or short period.

How much value does landscaping add to your home?

Tidy and well presented landscaping can add a significant amount of value a property. However it may not be a direct relationship between value spent and value added. The added value of well-presented landscaping is generally on the overall saleability of a home through increased street appeal/utility. It is a great way to get potential purchasers through your home on open homes.

In regards to how much should be spent on landscaping, it really depends on the overall value level and type of property. The market expectation of the level of landscaping in a high value suburb is significantly greater than that of a lower value suburb.

The nature of the property can also dictate the nature of the landscaping and site development utilised. For example if you own a high end character villa you ideally want to keep that timber picket fence out front rather than replace it with something more modern.

Property owners should consider the nature of their property and the wider neighbourhood before commencing any major landscaping works.

An example of this could be replacing timber joinery in a villa/character bungalow with modern aluminium joinery as this does not enhance the character and detracts from the value.

Does new carpet and a new roof add value?

These are generally considered as on-going maintenance costs. From a valuation point of view the focus is more along the lines of what would it cost to rectify any issues caused by not maintaining items of this nature rather than the value that they may add to your property.

Because carpets are a chattel, generally they won’t add value but will maintain value and help with saleability. Your roof falls under repairs and maintenance. The roof on a house is expected to be functional and do its job. You will lose money if leaks otherwise it is just a cost. You wouldn’t do it unless it’s needed. As long as the roof of the dwelling is well maintained, functional and in reasonable condition, you will not add huge value by putting on a new roof. But if the roof is leaking and does need replacing then this will detract from the value of a home quite substantially so it is worth renewing your roof if it needs replacing.

Does a garage add value?

The added value of garaging is also very dependent on the locality of the property. In areas which have larger land sites and generally more space, a new garage may not add much in value. However, in inner city suburbs where land is at a premium and the lots are much smaller and off street parking is scarce, a garage could add a significant amount of value to your property.


Latest News & Articles

Get right up to speed with what has been happening in the NZ property market as our Head of Research Jonno Ingerson takes you through the latest trends, with some very interesting new developments!

Topics covered in this months short video include the annual change in monthly sales volumes, a drop in values across a lot of the country and activity of first home buyers in the market.

This easy watch will bring you right up to speed - covering the main things of interest including market activity, values and buyer types active in the market.

 

The QV House Price Index for February shows that the wider Wellington Region continues to rise, with home values up 21.5% year on year and 4.3% over the past three months. Values are now 29.4% higher than in the previous peak of 2007.

The average value across the wider Wellington region is now $589,784 with the Hutt Valley the obvious stand-out performer. Upper Hutt values increased the most at 25.5% year on year and 6.3% over the past three months, while Lower Hutt is only slightly behind at 25.0% annual change and 5.8% quarterly change.

Our Buyer Classification data indicates this is heavily influenced by first home buyers, who tend to pay a premium compared to other types of buyers, increasing their activity levels across the area.

In fact, the strength in first home buyer activity for the Wellington region is continuing and is now at record high levels, representing over 30% of all current sales. 

However, it’s a different story for both mover and investor activity in Wellington, which is at the lowest level for many years. We will need to wait at least another month before we can claim this to be a new trend, but at least for now it appears that the lending restrictions are hitting other buyers in Wellington more than first home buyers.

“First home buyers remain very active in the region, likely taking advantage of KiwiSaver funds for deposits and also adjusting their expectations to get on the market – opting for properties further from town or smaller than they’d otherwise prefer” commented Senior Research Analyst Nick Goodall.

There remains a serious shortage of properties on the market in Wellington with the total number of properties currently on the market 27% below the same time last year.

Further north and the Kapiti Coast is also experiencing significant growth with strong buyer demand, likely off the back of improved transport lines to/from the Capital. Home values here have risen 21.5% over the past year - but this rate of growth has flattened off recently with the quarterly change now 3.4% after peaking at 7.3% in December 2016.

Movers are a significant part of the market here, typically overshadowing investor sales; however more recently investors have increased their presence with 37.0% of sales to this group, compared to 34.5% going to movers.

Getting back to the Capital now: Mayor Justin Lester announced this week that from 1 July 2017, all new build homes and apartments will qualify for a $5,000 rates rebate. It’s a strategic move to help alleviate housing stock pressure and incentivise construction of new homes for Wellington - especially for young families and people looking to get into their first home. We will be watching with interest to see the actual impact that this new policy has. 

 

The latest monthly QV house price index confirms that values are continuing to drop in Auckland and Hamilton, and their rate of increase has slowed considerably in most other areas around NZ.
 
 
Delving into those index figures though, what’s really going on? And can history teach us anything? The reported drop or slowdown is reflected in the chart below. This shows the average value of the housing stock in our six main centres (based on the house price index) from 2003 to the present.
 
 
Over the past 14 years we have seen values rise to a peak in 2007, before the Global Financial Crisis (GFC) knocked them back for a year or so. Values rebounded in most main centres during 2010, then remained flat for several years before rising in Auckland from 2012 and elsewhere from 2015. Lending restrictions were first imposed by the Reserve Bank in 2013, more were added in late 2015, and the latest round introduced in late 2016. These most recent restrictions (announced by the Reserve Bank in July and in full effect by October) seem to have taken some of the former heat out of rising values.
 
Looking at each of the six main centres in detail reveals some interesting differences: 
 
Auckland
In Auckland, the average value of housing stock reached a new peak of just over $1.05m in November 2016. Since then, the average value of a dwelling has dropped by just under $8k, or 0.7%.
 
 
This dip in values is in stark contrast to the rise of $118k or 13.6% in the 9 months before that November peak. It looks very similar to what we saw in early 2016, when a previous round of LVR restrictions saw values in Auckland drop by 0.8% over the course of two months, before then taking off again.
 
Much of the dip in values can be attributed to the LVR restrictions making it more difficult for people, especially investors, to secure mortgages. The big banks have also tightened up their lending criteria.
 
Against all this we’ve got strong net migration, high consumer confidence, mortgage interest rates at historic lows, plus a persistent housing shortage in Auckland. It’s hard to see how values can drop much further. Our call is that it’s likely that values will begin to rise again in a few months, just like they did in response to the previous round of restrictions. This time though - the rate of increase will likely be much less.
 
Hamilton
Just like Auckland, values in Hamilton have been dropping in recent months. The average value of housing stock in Hamilton peaked in October last year at $537k, and has since dropped 1% or just over $5k.
 
 
That’s a huge turn-around when you consider that values in the year to October last year increased by a staggering 25%, or $108k.
 
Some of the cooling in Hamilton is likely to be due to a decline in the number of Auckland investors purchasing in Hamilton. CoreLogic’s analysis shows that a year ago those Auckland investors were making up 18% of all the sales in Hamilton, but by January that had dropped to 10%. The huge increase in Hamilton values made the investment less compelling compared to a year earlier, and the tightening of lending to those investors will also have curbed their ability to purchase, even if they wanted to. Our analysis also showed that those Auckland investors tended to pay a significant premium compared to other buyers, so with their activity dropping it is no surprise at all to see Hamilton values ease back a little.
 
Tauranga
The average value of housing in Tauranga reached just over $672k in December 2016. In the previous year it had risen a hefty 24%, or $130k. In the past two months that rapid increase has disappeared, with values flat during that time.
 
 
Our CoreLogic weekly buyer demand data shows that this time of the year is much weaker than it should be: clear evidence that the lending restrictions are knocking a significant number of potential buyers out of the market.
 
A drop in demand would normally translate into falling values, so expect the next few months to remain weak.
 
Wellington
The lending restrictions are not yet having a major influence on values in Wellington.
 
In the three months to February 2017 the average value of housing stock across Wellington increased by 4.3%, or $24k, to $590k. In the three months to September 2016 this was increasing much faster at 7.1%. 
 
 
The lending restrictions have therefore slowed the increase slightly but not yet to the extent that we are seeing values dropping like we are further north.
 
Our analysis at CoreLogic shows that first home buyers are increasingly active in the Wellington region, particularly a little further out from Wellington City in Porirua and the Hutt Valley.
 
Buyer demand is also at record high levels in Wellington but the number of properties listed for sale has dramatically dropped compared to this time last year.  It all adds up to continued upward pressure on Wellington prices.
 
Christchurch
Following the devastating earthquakes in 2010 and 2011 in Christchurch, there was a shortage of housing supply. This led to values increasing from early 2012 to late 2014 at a time when Auckland was the only other part of the country increasing significantly in value.
 
   
From 2014 on, values in Christchurch have increased at a very slow pace, around 3% to 4% per year. It was the only main centre to not increase rapidly during the second half of 2015 and 2016, probably as a result of the post-earthquake increases of 2012 to 2014.
 
In the past three months, Christchurch values have dropped by 0.5% or $2,500 from their November value of $501k.
The CoreLogic weekly data shows that buyer demand continued to drop since the LVR restrictions were announced in July 2016. A normal seasonal pattern would see demand much higher at this time of the year. This drop would suggest that values may stay flat or dip slightly over coming months.
 
Dunedin
Like the other main centres, it appears as if values in Dunedin are not increasing as quickly as they were during 2016, when they grew by $52k, or $1,000 per week, to reach $354k in December.
 
In the past month, Dunedin values have hardly increased at all. Too early to call it a lasting trend, but interesting to note that while buyer demand was exceptionally strong throughout January 2017, there was a significant decline in February. That could be due to the announcement of the impending closure of the Cadbury factory in Dunedin. That drop in demand will likely flow through to fewer sales and less upward pressure on Dunedin prices.
 
 
 
So, that’s your property history lesson for this week. As you can see the strong increases in value evident throughout 2016 seem to have come to an end. However history also tells us that intervention in the form of lending restrictions tend to have only a temporary impact.
 
We are having a general election in September this year. While elections in themselves don’t always cause alarm amongst home owners, the potential for a change in Government to one with differing views on housing policy may do. As a result we expect considerable uncertainty in the market until the dust settles on the election.
 
It is also likely that when next summer rolls around, the strong upward forces of high migration, low interest rates, and a housing shortage will once again lead to increasing prices. Just expect winter to be quiet.
 
 
The latest monthly QV House Price Index shows that nationwide residential property values for February increased 13.5% over the past year. Values rose by 1.1% over the past three months and the average value nationwide is $631,349. The nationwide average value is now 52.4% above the previous market peak of late 2007. When adjusted for inflation the nationwide annual increase drops slightly to 12.0% and values are now 28.5% above the 2007 peak.
 
Residential property values across the Auckland Region increased 12.8% year on year and quarterly growth has decreased by 0.7% over the past three months. The average value for the Auckland Region is now $1,043,680 and values are now on average 91.0% higher than the previouspeak of 2007.  When adjusted for inflation values rose 11.3% over the past year and are 61.0% above the 2007 peak.
 
The full set of QV House Price Index statistics for all New Zealand for February can be downloaded by clicking this link: QV House Price Index (HPI) for February 2017
 
 
QV National Spokesperson Andrea Rush said, “The latest QV House Price Index figures show values have dropped over the past quarter in parts of Auckland, Hamilton and Christchurch and rate of value growth in Tauranga has also slowed as the latest round of LVR restrictions continue to take effect.”
 
“Meanwhile, values in the Wellington region continue to accelerate with values up more than 21.0% over the past year and 4.3% over the past quarter.”
 
“The Dunedin market also remains buoyant, with strong levels of activity and demand and continued steady value growth.”
 
 “While parts of Auckland have seen values drop values continue to rise in central Auckland, Waiheke Island and in Rodney and Franklin.
 
 “The same trend of negative growth was seen in parts of the Auckland market this time last year following the introduction of the 30.0% LVR rules for investors introduced in October 2015, then value began increasing again by April 2016.”
 
“So it’s possible the latest quarterly decrease seen in parts of the Auckland will be relatively short-lived as the market drivers of relatively low interest rates, strong net migration and a high number of sales to investors remain.”
 
Auckland
Home values have risen over the past three months in some parts of the Auckland region but have decreased in others as the latest round of LVR restrictions take effect.
 
The former Auckland City Council central suburbs rose 12.5% over the past year and 0.2% over the past three months with the average value now $1,224,673. Waitakere City values were up by 13.8% year on year but decreased 1.7% since December, with the average value dropping from $845,864 to $831,705. Values in the former Manukau city area rose 14.2% year on year but decreased slightly by 0.4% since December, with the average value down from $906,004 to $902,477. Values in the former North Shore City suburbs also rose 11.2% year on year but decreased 2.2% over the past three months from an average value of $1,224,477 in December to $1,196,987.
 
Rodney is still increasing with values there up 13.6% year on year and 1.4% over the past three months and the average value is $936,877. Franklin is also up 13.3% year on year and 2.4% since December and it has an average value of $663,638. Papakura values also increased 13.6% year on year and 0.9% over the past three months and the average there is now $686,465.
 
QV Auckland homevalue Manager, James Steele said, “There continues to be uncertainty around where home values are going and there has also been a surge in listings coming onto the market during February which is giving buyers more choice.”
 
“Properties at the lower end of the market in suburbs popular with investors tend to be not selling for the same premiums they were before the new LVRs came in.”
 
“However, there are some record sales prices still being achieved and there remains strong competition for homes in areas popular with both first home buyers, movers and investors not affected by the new loan to value ratio rules.”
 
“Building costs are also reported to be rising due to high demand leading to an increase in the price of some materials including timber framing, roofing, and steel. High demand for builders and trades people is also leading to lack of availability which is also slowing build time process and leading to higher costs.”
 
“Some investors, who have been taking a wait and see approach since the latest round of LVR restrictions, have reportedly started looking again to see areas where they may get a bargain.”
 
“Meanwhile, the latest CoreLogic Buyer Classification sales data showing the share of sales to Auckland first home buyers has dropped to a low of 19.0%, while the share of sales to Auckland investors has climbed back to the peak of 43.0% over the last month.”
 
“Some Auckland first home buyers are reporting having more difficulty raising finance due to stricter lending criteria.”
 
Hamilton  
Hamilton home values have risen 16.7% year on year but have continued the downward trend seen recently dropping slightly by 0.8% over the past three months and values in the city are now 47.2% higher than the previous peak of 2007. The average value in the Hamilton is now $532,171.
 
QV homevalue valuer, Stephen Hare said, “There is still good activity and demand in the Hamilton market and there have been more listings coming onto the market during February.”
 
“Properties in the $400,000 to $500,000 range have become a rarity and are attracting strong demand first home buyers who are snapping them up very quickly.”
 
“There also continues to be strong interest for new builds in the suburbs of Flagstaff North and Rototuna.
 
“In the nearby Waipa District, Cambridge is continuing to see strong demand for homes with high turnouts at open homes and mid-range homes in the town are now selling for between $500,000 and $600,000.  Sales ‘by negotiation’ are becoming the favoured way to sell in the current market rather than auctions which were more popular last year.”
 
“While other Waipa towns such as Te Awamutu continue to see good demand but are not as hot as Cambridge.”
 
“Towns that are in commutable distance to Hamilton, like Ngaruawahia, Raglan and Morrinsville are still experiencing good demand, mostly from first home buyers and some investors, but not as many as prior to the latest round of LVR restrictions.”
 
Tauranga
The Tauranga market continues to rise but at a slightly slower rate than prior to the LVR restrictions introduced late last year. Home values in Tauranga City up by 19.4% year on year and 1.3% over the past three months. The average value in the city is now $673,923. Meanwhile, the Western Bay of Plenty values there rose20.1 % year on year but decreased by 1.6% over the past three months. The average value in the district is now $581,540.
 
QV homevalue Tauranga, Registered Valuer, David Hume said, “The Tauranga market is off to a fairly robust start in 2017, although sales volumes are down on record levels this time last year.”
 
“The market for high end properties is showing signs of good growth over the last six months with Auckland buyers making up a good portion of demand.”
 
“Even with the new LVR restrictions out of town investors are still active in Tauranga given the more attractive yields to some other major centres.”
 
“Rental accommodation continues to be to in short supply with the median rental now at $450 up from $350 two years ago.”
 
Wellington   
The QV House Price Index for the wider Wellington Region continue to rise with home values up 21.5% year on year and 4.3% over the past three months and values are now 29.4% higher than in the previous peak of 2007. The average value across the wider region there is now $589,784. Upper Hutt values jumped 25.5% year on year and 6.3% over the past three months. Lower Hutt values were also up a huge 25.0% year on year and 5.8% since December.
 
QV homevalue Registered Valuer, David Cornford said, “Buyer demand remains strong in the Wellington market with values still increasing, but at a more steady rate.”
 
“The market is less frantic than it was prior to the latest round of LVR restrictions, with fewer investors active in the market and buyers are taking a more measured approach.
 
First home buyers who are not affected by the new rules remain very active and according to the CoreLogic Buyer Classification data this group accounts for more than 30% of sales in the Wellington region currently.
 
“Upper Hutt continues to see strong demand from first home buyers and this is leading to continued strong value growth there.”
 
“New listings have continued to come to the market, as is typical for this time of year however there is still a shortage of available stock.”
 
“The Kapiti market is also still buoyant with strong activity and demand for housing on the coast resulting in a rapid rise in home values over the past year although the rate of increase appears to have stabilised recently.”
 
“ In Kapiti there are strong turnouts at open homes and many properties are selling quickly with multiple offers.”
 
“Currently the supply of properties for sale is not keeping up with demand and we can expect this imbalance to continue for some time as more people move into the region as transport links continue to improve.”
 
Christchurch 
Home values in Christchurch City increased 2.8% year on year and have decreased slightly by 0.5% over the past three months and they are now 31.4% higher than the previous peak of 2007. The average value in the city is now $498,710.
 
QV homevalue Christchurch, Registered Valuer Daryl Taggart said, “The Christchurch market is showing normal levels of activity but with the supply of homes meeting demand, there is nothing driving value growth so home values are currently relatively steady.”
 
“Well-presented properties in desirable locations that are marketed for the right price are selling quickly and continue to be in strong demand.”
 
“Some investors have been ruled out of the market now it’s harder to gain finance following the latest round of LVR restrictions particularly now rents are lower than they were during the height of the rebuild.”
 
“However, there are still established investors with the means and ability to purchase in this market.”
 
Dunedin
The Dunedin market continues to be buoyant with city home values rising 15.6% year on year and a 5.3% over the past three months. Dunedin remains the most affordable city in New Zealand with an average value of $359,629. Dunedin-Coastal saw the highest growth over the past quarter with values there rising 6.9 % since December.
 
QV homevalue Dunedin Registered Valuer, Duncan Jack said, “Buyers are still very active and there is good demand across all the value ranges in the Dunedin housing market with the low-mid range still being the most active.”
 
“Properties continue to sell very quickly with fierce competition from buyers, who are putting their best offer forward in the first instance.”
 
“Listing levels remain relatively low and appear to be fairly consistent with previous months.”
 
“The listing levels may well be partially affected by the quick turnover of stock and it certainly appears that demand is exceeding supply in the local market”  
 
“The Christmas slow-down in the market was less significant this year compared to previous years.”
 
“Value levels are continuing to increase in the low to mid ranges.  In the upper ranges, demand is still good but there hasn’t been the same notable value increases at this end of the market that we have seen for the low to mid-range properties.”
 
Nelson
Nelson home values have increased by 16.9% year on year and 5.0% over the past three months. The average value in the city is now $513,933.  Values continue to rise in the Tasman District up 15.2% year on year and 2.9% over the past three months. The average value in the district has now topped half a million dollars and is sitting at $501,153.
 
QV homevalue Nelson Registered Valuer Craig Russell said, “Activity in the market has increased considerably in recent weeks after low sales volumes recorded over the January holiday period.”
 
“There has been a steady stream of new listings come onto the market during February and the market remains buoyant.”
 
“Investor activity appears to have cooled slightly given an upwards creep in interest rates, tighter lending restrictions, the new 40% deposit rules and increased values all combining to provide weakening returns for investors.”
 
“We have seen an increase in section values in Motueka with strong demand and a lack of sections available. Lifestyle properties particularly on the Waimea Plains have been sought after given they are easy contoured and are located in close proximity to amenities in nearby Richmond.”
 
Hawkes Bay
The rate of value growth in Napier has slowed a little, rising 18.8% year on year and 2.6% over the past three months. The average value in the city is now $419,190. The Hastings market continues to see strong value growth up 21.7% year on year and 5.8% over the past three months. The average value there is now $397,013.
 
QV homevalue Hawkes Bay Registered Valuer Michelle Drinkrow said, “The market is ticking along nicely and there are more properties on the market than there has been with some vendors holding out for top price expectations.”
 
“However, we have noticed some of the heat has come out of the market and buyers are not as frenzied as they were last year. 
 
“While properties are still selling for good prices, buyers are acting in a calmer manner and are taking more time to perform due diligence in many instances.”
 
“Auctions and tenders remain the most popular methods of sale and both investors and first home buyers appear to still be active in the lower end of the market.”
 
“The demand for vacant land remains strong, with a shortage of available land in the main centres.  Buyers looking for house and land packages in the region of $500,000 are generally not first home buyers and are movers looking to upgrade.”
 
Provincial centres
In the North Island, the regions to see the highest percentage value growth over the past three months were the Kaipara, Far North, Rangitikei and Kawerau districts with values in these areas rising more than 8.0% over the past three months. The only regions where values dropped in value over the past quarter were the Western Bay of Plenty, Stratford and South Taranaki.
 
In the South Island, the MacKenzie District saw values jump 9.0% over the past three months, while Central Otago was up 7.8% and Southland was up 6.9% over the last quarter. Values decreased over the past three months in the West Coast districts of Buller, Grey and Westland, as well as in Ashburton and Waimate.
 

The latest QV monthly house price index has just been released. I’m looking for any signs that the latest round of lending restrictions have begun to impact values. After all, you might expect that dramatically limiting people’s ability to get a mortgage would mean fewer people competing for properties and so the rate of value increase would slow, or even drop.

 

First of all it is worthwhile taking a look at the table below to see how much values have increased over the past year, and where that now leaves the average value of houses in each centre.

Now to look at whether things have changed in recent months. I always find something visual easier to interpret than tables of numbers, or screeds of words. Here then (below) are two maps of New Zealand showing value change over the past six months based on the monthly index.

The right hand map shows the value change over the latest three months. The left hand map shows the increase in the three months to October 2016. On both maps the larger the bubble, the more sales in that area. The colour range goes from brown being fastest increase, through orange for moderate increase, grey is flat, and blue is decrease. Both maps have the same colour scale meaning that if a colour changes from one map to the other it represents either a speeding up or slowing down.


The first thing I notice is the colour change in the Auckland area. Back in October the bubbles were dark orange to brown, showing relatively rapid increases in value. In the latest three months there is far more grey and light orange. The rate of value increase has therefore slowed or even flattened in Auckland. Likewise in Hamilton, Tauranga, the lower North Island and Christchurch.

There is still strength in the smaller centres in the Far North and Waikato, while there are a few smaller centres in the North Island dropping in value. New Plymouth, Whanganui, Napier and Nelson are all unchanged, while Dunedin and Invercargill have actually slightly picked up the pace.

My conclusion is therefore that there has definitely been an impact on the larger North Island centres. The investor restrictions are starting to bite in Auckland, and on Auckland purchasers in Hamilton and Tauranga. Of course the big question is whether this is the beginning of a big crash or the bursting of the bubble. I think not. My opinion is that within a few months potential purchasers will find ways around the lending restrictions, then low interest rates, high migration and a housing shortage will push values upwards again.

For more insights into various other measures of the housing market, check out CoreLogic's latest monthly property and economic update video.

 

New Zealand Regional Maps: