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.


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Regional Predictions Become Fact

Tuesday, 14 August 2018

As a property data research analyst, a personal goal of mine is to be able to predict market movements and forecast with certainty. However, with so many factors at play, the property market is certainly a tricky one to predict. For New Zealand’s regions - my expectations are becoming fact.

The regional property market slowdown is definitely continuing. As we saw in the the latest QV House Price Index (powered by CoreLogic data), ten of the twelve regions analysed experienced a decreasing annual value growth rate since the month beforehand. As I reported at the time of the index release, the easing of net migration will be impacting these markets, on top of tightening credit and recent value increases affecting affordability.

Invercargill and Palmerston North were the only two areas to buck the trend of declining value growth, but their performance isn’t exactly reason to celebrate, with value ‘growth’ of just 0.1%.

Even the top-ranked regional performer (the Art deco capital of Napier) is experiencing a slow-down: this Hawkes Bay hot-spot may have the strongest annual value growth of the main urban centres, but at 14.3% (end of July’s figure), that represents a significant fall from 17.6% at the end of April. Nearby Hastings has also seen a similar slowdown, dropping from 12.5% at the end of April to 8.4% at the end of July. The Bay is epitomising the expected regional slowdown.

In second and third place behind Napier are the lower value centres of Whanganui (11.2%) and Invercargill (9.8%), just slightly ahead of the higher value centre of Palmerston North, which recorded 9.6%.

Another lower value area we assessed was Gisborne. Here, values continue to slow, down from 10.1% at the end of May 2018 to 7.3% at the end of July. Gisborne is however lucky to have an underlying economy (with key industries of agriculture, forestry and viticulture all performing pretty strongly) which supports property values. ASB’s regional economic scorecard for the March quarter actually ranked Gisborne as a respectable 6th out of 16 regions. Gisborne’s tourism is also doing well, with guest nights hovering around record highs.

The New Plymouth annual value growth rate declined further to 5.3% amongst anecdotal discontent with regards to the governmental announcement of no new oil and gas exploration permits in the area.  Nelson comes in last with just 4.4% annual value growth: the higher average value ($559,023) is impacting affordability, especially with credit from banks remaining tight.

People’s inability to secure funding, especially at the higher end of the market is seeing less price pressure translate to minimal value growth. As we begin to approach spring, the question is whether or not the market will respond with increased listings.

On the subject of listings, in most regions outside Auckland, listings are at near all-time lows, which is contributing to the controlled slow-down in values, as active buyers still face competition for the few properties on the market.


Author: Nick Goodall, Head of Research, CoreLogic

 
Levy spikes and market hardening
In 2018 we’ll see a general hardening of the market. Insurers face increased losses against a backdrop of increased global re-insurance cost. They therefore become less price sensitive and instead look to maximise premiums received from policyholders. New Zealanders paid over $9.3b in premiums to the big insurers in 2017, a 7% increase year on year1. The climb in premiums isn’t going to end any time soon. 
 
One of the indirect influences driving premium increases is the levy spike. What most policyholders don’t realise is that 1/3 of their insurance premium is now in fact comprised of what is effectively a government tax  - the fire service levy, the EQC levy and of course: GST. From 1 July 2018, the Fire Service Levy will increase 40% increase to $106. Likewise, the EQC levy grew 33% to $200 as of 1 November 2017. Insurers have zero control over these levies, but the resulting premium lift won’t go unnoticed by their policyholders in 2018.  
 
The start of the end of policy cross-subsidisation: 
In NZ, Tower has announced the end to cross subsidisation of risk across the country and IAG and Vero have each signalled in their financial statements that they will be looking to end the current cross-subsidisation of premiums, instead placing the price of risk where the risk is actually located.   
 
It’s no surprise with our varied geography that NZ has a range of risk profiles. Auckland and the North have a lower risk profile. Yes, they have volcanoes, tsunami and coastal erosion risk but only at a 1 in 100,000 year event level. In Wellington however, insurers re-insure in the face of a 1 in 1,000 year earthquake event. Yet up until now, insurance premiums didn’t differ that much across NZ.   Tower will be the first to change that and I’m sure the others will shortly follow.
 
Take the example of a property in Petone: a suburb close to Wellington City. It sits within a coastline ribbon, upon silt, next to both a river and hills and on an actual fault line. All of which means a five-way risk profile involving liquefaction, tsunami, earthquake, flooding and landslide. The ‘technical price’ of such a policy should be in the region of $6,000. However policyholders are more likely to pay a ‘market price’ based premium of $1,500. The same as a policyholder in Auckland’s Ponsonby - whose property has a much reduced risk profile. 
 
Whilst Aucklander’s may want to rejoice in the prospect of reduced premiums, Wellington’s premiums almost certainly will climb, especially if you’re in one of those higher risk locations within the region (currently, most insurers treat the entire Wellington region as having a similar risk profile). 
 
The move away from cross-subsidisation could result in a change in how insurers approach risks. It’s not difficult to anticipate some areas of NZ becoming partly or completely uninsurable - or at least very, very expensive. Policyholders in those areas could face either a high premium, a high excess for a certain event (for example $10,000 for flooding vs. the standard $400) or possibly no cover for specific events.  Despite being one of Welllington’s most prestigious and affluent suburbs, some homeowners in Eastbourne are already experiencing a difficulty in securing new insurance: not surprising given some properties face a very real risk of crumbling into the sea at some point.
 
And when you look to areas which have suffered severe flooding over recent history, you can actually see the same flood happening 2 or 3 times: Dunedin and Whanganui are two such examples. Dunedin has had three 1 in 100 year floods in the past 4 years!  Looking at it from the insurer’s perspective - it doesn’t make good business sense to offer insurance in the face of the high likelihood of repeat events
 
Australia has already moved to a much more granular price model. In some areas, flood cover is simply unavailable because of regular flooding.  It may take a few years for the full effect of the cross-subsidisation change to be evident across NZ, but considering the top 3 insurers have warned of its imminence, it’s likely that insurance will transform from being an after-thought when purchasing property, to becoming a key driver in purchasing decisions, along with valuations and LIM reports.
 
Insurance price could indeed become a deciding factor if the property has very high location specific risk. Take a four bedroom house in Wellington’s Roseneath with incredible harbour and city views, possible only because the house is actually hanging onto a cliff, with a cantilevered carport above it. The carport may have local council safety certification, but the actual cost of insurance for that scenario could be significantly more than a much more expensive home located in a different suburb - say Thorndon – as insurers begin to take a 360 degree view of risk.
 
In addition, Banks are taking a closer interest in insurance.  After all, insurance is renewed annually, whereas the banks can have a contractual relationship that will last for decades. Mortgage holders have an obligation to adequately insure their properties. If insurance becomes too expensive or hard to get in some areas, I can foresee an increasing risk of under or non-insurance, neither of which is great news for banks and their customers. Keeping track of adequate insurance using a tool such as Cordell Sum Sure integrated into the purchase process becomes even more important.
 
But the end of cross subsidisation is a defining moment for insurance in New Zealand.  Those who have bemoaned rising premiums are about to get hit again, especially if they live in the Capital. Maybe living north of the Bombay Hills isn’t as bad as it previously seemed.
 

http://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&objectid=12004049. Figures mentioned in this article do include all types of insurance (including life and health), exclude ACC and EQC and are collected from 28 of the 88 licensed insurers in New Zealand – accounting for nearly 90% of the assets and premiums.

 

Colour Crush: Terracotta

Friday, 10 August 2018

 
Terracotta, typically associated with sand hues and a desert landscape, but it had a big moment in Australia’s suburban scene. Everything from roof tiles, to pavers, and driveways were littered with this warm shade and you couldn’t spot a garden bed without a terracotta pot or planter – likely the home to a herb garden or two. Although gradually disappearing from suburban developments, and being replaced with modern grey tones, terracotta is making a come-back! This time in the form of interiors, taking a more organic shape and being celebrated as the colour to watch for the season. Far from its neighbouring orange, terracotta has an earthiness to it, that it’s cousin doesn’t. Paired with colours of the earth, if you try one colour this season, make it this one!
 
 
For a little taste of how this would look and feel in your home explore a deep clay shade in a texture that Is evocative of sunburnt landscape. The red center of Australia, desert landscapes, Moroccan horizons. Each with its own distinct flavour but softened with white walls or a light timber flooring gives you a pop of colour without pushing your boundaries too far. If you’re concerned about making choices with your home that are classic and timeless then this is the way to explore a colour love you may not have tried before. As always, bringing elements of the colour in through your dressings are a cost-effective way to trial it without permanency. Glassware and table linens are another great way to explore this, but the most authentic to the origins or terracotta would be through pottery. If you have a love of ceramics, now is the time to explore those terracotta hues and bring some pottery in its most organic shapes (to keep that earthy look and feel) into your home.
 
 
If your Pinterest board is saturated with inspiration from northern Africa and sand dune landscapes that litter the Mediterranean then I would suggest you’re ready to take this trend to the next level. Your bathroom is such an exciting place to explore this colour palette as somewhere that in our modern homes are usually reserved for white, black and grey. To amplify your wow factor, with the right colour pairing your home can feel like an oasis. Taking these terracotta hues and using modern patterns – you can find some great examples in the Sarah Ellison x Terranova Range – gives this colour a fresh platform in our new age homes.

Your Guide To Using Your Bar

Monday, 6 August 2018

 
Ah, the old faithful bar. A space to truly maximise your ability to entertain in your home. Although seldom used to their full capacity, a bar, in the right room, with the right tools, can be an asset to your entertaining formula. When curated carefully your bar should celebrate all the magic about hosting. A space to gather around, or create exciting concoctions for your guests, at the very least have the ability to crack a bottle. Depending on your space your bar can be a low maintenance kitchen accessory or a stand-alone feature, create a space that best reflects your entertaining style.
 
 
A Casual After Work Wine, Bar
This style of entertaining calls for a bar cart! To be whipped out for the casual after work wine or cheeky beer. Minimal and functional, you can slot a mini bar cart alongside your kitchen, or as a side table in your living room. Utilising the right design can serve as a multi-purpose piece and it also easily manoeuvrable. At its least functional it includes a minimum of 4 glasses, a bottle opener and straws. But when truly allowed to shine, it can cover glassware, a small selection of liquor, all sorts of serving tools - think stirrer, bottle opener etc – here however you can complement your interiors. Greenery, coloured glass, vases, artful coasters and even cocktail recipe books can be styled here to pair form with function beautifully.
 
 
Fully Fledged Party Home, Bar
Your home is known for entertaining! You host a celebration like no one else and everyone always wants to have the after party at your place. Your set up is second to none. Although you may not have loads of space to work with, you take the time to ensure your home has all the features you need to pull this off every time without any notice. This bar is a fixed feature in your home, incorporating drawers and cupboards for additional storage. Ideal for multiple glassware options, champagne flutes, wine glasses, crystal cut tumblers and beer pints are all at home here. As this feature is a permanent fixture, it’s important you choose a piece that pairs with your interior style but can also be used to store and display. Some of your most beautiful glassware can be displayed and now is the time to invest in an accompanying ice bucket, and cocktail tumbler. This can incorporate a wine rack for the ultimate storage solution, or a small mini fridge depending on your configuration.
 

Rosalie Molloy

Creative Director
www.notsavinglives.com

According to the CoreLogic July QV House Price Index, property values in Wellington City grew by 2.3%, reversing the previous losses experienced since March 2018.

CoreLogic head of research Nick Goodall said, “While this level of growth over one month is exceptional, it is perhaps not unexpected given that the previous drop was a surprise.” 

He said, “This bounce back is likely reflective of a volatile upper tier of the market which has a limited amount of potential buyers, especially given recent credit tightening. Low listings in the capital mean some price pressure remains, especially in the price bracket below $675,000 where annual growth hovers just under 10%.”

Looking at the wider Wellington region, Porirua values have grown strongly since April’s index (+3.0%) but did in fact plateau in the month since June’s results. Meanwhile value growth in both Hutt City and Upper Hutt has been more modest but consistent.

Values in Dunedin continue to grow, with 0.4% growth since the June index keeping the quarterly growth figure at 1.7% - the best of our six main centres.

According to the July results, Auckland was the only main city to see some value depreciation – by 0.3%, however values are marginally up over the three month measure. This is unlike Tauranga, where values remain 0.2% below April, despite a 0.4% lift in July’s figures.

In Christchurch, values remain slightly below those of a year ago, averaging $495,692 as at the end of July 2018.

Meanwhile in the regions, the recently witnessed, and expected, slowdown continues. Ten of the twelve regions detailed saw a decrease in the annual growth rate, since last month. Goodall comments “The easing of net migration will be impacting these markets, on top of tightening credit and recent value increases affecting affordability.”

Invercargill and Palmerston North were the only two centres to buck the trend of a slowdown in annual growth, with very minor (0.1% point) increases. Elsewhere, Napier retains top spot, with the strongest annual growth of the main urban areas – however the continued reduction in annual growth rate, now 14.3% - down from 17.6% at the end of April – epitomises the expected slowdown outside the main centres. Nearby Hastings has seen a similar slowdown (from 12.5% at the end of April to 8.4% at the end of July).

The lower value centres of Whanganui and Invercargill continue to experience growth of roughly 10% or more, as does the slightly higher value Palmerston North. 

Meanwhile values in Gisborne, which has a similarly lower value profile, continued to slow, with the annual growth rate down to 7.3% (from 10.1% at the end of May 2018). Despite the slowdown in values, however, Gisborne’s property market looks likely to stay supported by the underlying economy. Indeed, ASB’s Regional Economic Scoreboard for the March quarter ranked Gisborne a respectable 6th out of 16 regions for recent economic performance. Key industries in Gisborne include agriculture, forestry, and viticulture, which are all pretty strong at present. Tourism in the area is also doing well, with guest nights hovering at around record highs. 

As flagged last month, New Plymouth is an area of interest as anecdotal reports of local discontent increase in response to the Government announcement of no new oil and gas exploration permits being granted. Values in New Plymouth decreased between the June and July indices and the annual rate of change dropped further to 5.3%.

Nelson is the only main urban area to have experienced annual growth lower than this, as the higher average value ($559,023) impacts affordability, especially as credit from banks remains tight.

Mr Goodall said, “With such a sustained period of caution from the banks, the New Zealand property market continues to slow down across the board. People’s inability to secure funding, especially at the higher end of the market is seeing less price pressure translate to minimal value growth.  “As we move through the winter months and begin to approach spring, the question is going to be whether or not the market responds in terms of listings on the market.”

He said, “In most regions outside Auckland, listings are still near all-time lows which is contributing to the controlled slowdown in values as active buyers still face competition for the few properties that are on the market. Typically new listings start to pick up in August after bottoming out in July each year so we will pay close attention to that data this month.”

While Mr Goodall isn’t expecting a change to the OCR rate (currently 1.75%) at the 9 August 2018 RBNZ announcement, he said the accompanying monetary policy statement will be keenly awaited. 

“Economic growth has weakened, as has net migration. This, on top of the flagging property market, starts to bring in the question of whether the Bank may consider loosening the LVR restrictions. However, given these are designed to protect the country’s financial stability, and global risks remain, I think it’s unlikely just yet.”

Currently, one of the most talked about market factors is the supply side of the equation, with KiwiBuild front and centre. Building consent statistics remain very strong, which is important to make up for the lack of building earlier in the decade. Crucially, this is especially the case in Auckland, and intensification via more townhouse type consents is also encouraging. We still have a long way to go however, and longer term this intensification will need to increase further, with a response in apartment building, especially along common public transport routes.

KiwiBuild’s role in adding to supply and ensuring affordability of new builds will remain under the spotlight, but with momentum beginning to build, there is optimism within the industry.

In summing up, Mr Goodall said “Market conditions have generally weakened, however we’re not expecting any form of a significant downturn based on current conditions. Restrained growth is still the order of the day.”

Author: Nick Goodall, Head of Research, CoreLogic