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

This monthly report created by the CoreLogic NZ Research Team covers the main economic factors that influence the housing market, and then looks at sales volumes, values, and active buyer types in both the national and main centre housing markets.
 
 
Some highlights of the June - July 2017 report:
 
  • Migration – We have started to once again experience a net loss of Kiwis to Australia, but this is unlikely to return to previous high levels of loss.
  • Building Consents – These have trended down right across the country in recent months, which is the last thing we need when our housing shortage continues to grow.
  • Consumer confidence – remains positive as people feel good about both current and future economic conditions.
  • Sales volumes – bounced back up from a very low April, but are weaker than last year across the whole country, especially in the North.
  • Market activity – this continues to slide downwards and is now well below the same time last year. This will translate into far fewer active buyers in the market over coming months.
  • Listings – New listings are at normal seasonal levels, but the lack of sales means that the total stock of properties on the market is much higher in Auckland than the same time last year. More choice along with fewer active buyers means far less reason for prices to rise. Meanwhile total listings continue to drop in Wellington and Dunedin which means it is still tough for buyers.
  • Buyer Classification – the share of sales to investors has risen in many areas, but given that the overall number of sales has dropped almost everywhere, sales to investors, particularly those needing a mortgage, has actually dropped dramatically. But this drop in investor activity has come at a cost with first home buyers at record low numbers in Auckland.
  • Values – Auckland and Christchurch values continue to slowly decline, Hamilton is flat, while the rate of increase in Tauranga and Wellington is now much slower than last year.
  • Outlook – Falling demand will lead to falling sales. Meanwhile total listings will rise leading to more buyer choice. With uncertainty about what polices on migration and housing will result from the upcoming election in September, it is likely that the current market weakness will persist through until after the election result is known. Strap yourselves in for a slow winter in the property market!
To download the full report click here.
 
You can also watch the most recent video update below, in which our Head of Research Jonno Ingerson takes you through the latest trends. 
 
 

Kiwis and their assets

Thursday, 15 June 2017

Despite all the talk of affordability, Kiwis still prefer their assets in property form but NZ's listed stocks are the rising star.
 
The value of residential property continues to grow beyond one trillion dollars, dwarfing the value of other asset classes, with residential mortgages secured against 23% of this value. 
 
 
Listed stocks have bounced around in the last couple of months but the overall trend has been upward since the start of the year. They are now only just over 2% below their all-time high of September 2016.
 
Learn more about the latest property trends by downloading your free copy of the CoreLogic May/June Property Market & Economic Update Report, available now. 
 
We’re currently looking at a nationwide downwards slide in sales volumes, a trend that started a year ago.
 
In Auckland, volumes are down 30% year on year, slightly less in Hamilton and Tauranga and less again as you move down South. But the slowdown in sales is definitely nationwide.
 
 
 
Furthermore, the sales slow-down has hit all types of buyers, not just investors. Whilst the share of sales to investors has rebounded, the actual number of investors is well down. Likewise, the share of First Home Buyers in Auckland is steady, but their actual numbers are significantly down. 
 
Learn more about the latest property trends by downloading your free copy of the CoreLogic May/June Property Market & Economic Update Report, available now. 
Jonno Ingerson, Head of Research, CoreLogic NZ Ltd.
 
The latest monthly QV house price index shows that the rate of increase of New Zealand property values is near zero.
 
It is yet another source confirming a widespread slowdown in the housing market - from demand, to sales volumes and of course values.
 
 
First I’ll cover values, then take a look at some of the causes, and end with my perspective on where this is all likely to go.
 
Value increases slow
As always, there are wide variations between cities and regions, but the general pattern is of a marked slowdown in the main cities, especially in the north, accompanied by a distinct slowing in regional areas.
 
To be clear - we aren’t talking about a widespread drop in values. In fact in many areas they are still increasing. It’s just that the rate of that increase is a lot slower than it has been over the past two years.
 
Auckland always tends to get plenty of attention when it comes to house prices, so let’s start there. According to the QV index, values in Auckland have been very gradually sliding since November, and have now dropped 0.7% since then. Digging a little deeper, we can see that values have been dead flat since November in the central city, Manukau and Papakura. The North Shore and Waitakere are both down over 2% since that time. Meanwhile, the old Rodney area in the North has risen 4.5% over the same time, still being pushed up by Aucklanders looking for more affordable housing on the northern fringe. Contrast all this to most of Auckland increasing at about 8% in the six months leading up to November. Quite a change!
 
From about mid-2015 onwards, values began to rise rapidly in most of the other main centres, with the exception of Christchurch. That rate of increase has eased off to varying degrees.
 
In Hamilton, values were increasing as fast as 31.5% in the year to July 2016. Value change in the last six months has been exactly zero. Tauranga was rising 28.5% in mid-2016 and in the last six months only 2.7%. Getting the picture?
 
Further south, in Wellington the value increases didn’t get to the same crazy rates as further north, but having peaked at 21.5% annual change in 2016, that rate has now slowed to 7.4% over the past six months (an equivalent annual rate of 15%).
 
In the South Island, Christchurch and Dunedin are marching to their own beat. Christchurch values have been increasing only very slowly for the past three years, at a rate of between 2% and 4% annually. They are now dropping very slowly at a rate of 1.2% over the past six months. Dunedin has only just begun to slow in the last month. Another standout area worthy of mention is Queenstown. A stellar performer last year, increasing at 32% in the year to November, the last three months have seen a miserable 1.2% increase. Quite some slowdown that.
 
Many of the smaller centres are still increasing in value. Take Central Otago for example, where the overflow from the hot Queenstown market has led to rapid value increases in the likes of Cromwell and Alexandra. There are plenty of other examples, like most of the lower half of the North Island.
 
But I don’t think that growth in many small areas is going to last. More on that later.
 
When demand drops
The reasons behind the slowing market are not new; the Reserve Bank lending restrictions, banks getting even tighter on their lending, mortgage rates rising slightly, the winter season and finally increasing uncertainty about policy changes post-election.
 
These things impact demand first. Our unique measure of demand reflects that, showing an immediate drop from the moment the Reserve Bank changes were announced last July.
 
Sales volumes drop
As demand drops, the number of sales drops a few weeks later. The downward slide in sales volumes shows as the last three months of sales were 31% lower in Auckland than a year earlier, and the month of April was the lowest since 2008 in the depths of the post-GFC recession. This year on year sales decline when you look at the last three months is repeated in Hamilton (28%), Tauranga (23%), Wellington (18%) and Dunedin (16%). In many smaller towns there was a massive increase in sales activity in 2015, up to double the previous year, but that too has now begun to unwind rapidly and volumes are back to where they were three years ago.
 
And then values get hit
When sales volumes drop, values drop a few months later. No hard and fast rules here, but it is usually in the range of four to nine months between a significant drop in sales volumes and a subsequent drop in values. So no surprises to see values changing the way they are.
 
Demand continues to slide
The weeks of the Easter and ANZAC holidays had an expected drop in buyer demand. That demand usually bounces back to pre-Easter levels, but these past few weeks have been unusually low. This drop in demand will almost certainly lead to fewer sales, which in turn will flow through to further weakness in values.
 
The number of listings has an impact too
The number of properties on the market will influence value change. In Auckland a lack of sales combined with a normal level of new listings has meant that our measure of the total number of properties on the market is 50% higher than a year ago. That’s a lot more choice for buyers and takes a good deal of the upward price pressure out. Wellington and Dunedin on the other hand both have even fewer listings than this time last year, making the choice even worse for buyers, and so upward price pressure remains. 
 
My predictions
I would be very surprised to see a rebound in values anytime soon. Previous rounds of Reserve Bank lending restrictions have had only a temporary impact before everything rebounds. This time the signs of a slowdown are much more widespread. I’m still picking it will be post-election before activity picks up again. That is a prediction of human behaviour though, and as we all know that is a notoriously dark art.
 
 

 

Thanks to the way dates fell in the working calendar, the Statutory Holidays of Easter Break and ANZAC weekend were both in close proximity this year. What effect did this have on the property market?
 
Whilst workers rejoiced over the fact that they could take just 5 days of annual leave to get a whopping 12 days off in return, it wasn’t such great news for the property market. 
 
 
With many people taking extended leave in April, it is likely to have impacted on the property market. A slow-down in sales activity is particularly evident in Auckland - over the previous three months we’ve seen a 30% reduction in sales volumes over the same three months the year previous. 
 
Whilst the impact of the slow-down lessens as you move South, it is nevertheless nationwide. This slowing of sales activity follows the drop in demand that we’ve seen and falling sales activity usually means less upward price pressure. 
 
Learn more about the latest property trends by downloading your free copy of the CoreLogic May/June Property Market & Economic Update Report, available now