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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First home buyers (FHBs*) have generally been paying the highest prices relative to each area’s average property value in less expensive markets, like Palmerston North and New Plymouth. Buying budgets can stretch a bit further in locations where property is generally cheaper, potentially helping FHBs to enter the property ladder at a higher rung - so this all makes sense. It’s also not surprising that FHBs tend to account for a higher share of purchases in NZ’s cheaper areas. By contrast, FHBs are struggling to compete in more expensive areas, like Queenstown..
CoreLogic Property Economist Kelvin Davidson writes:
Our Buyer Classification series shows that, despite high prices and reduced affordability across many parts of the country, FHBs still have an appetite to get into the property market and are finding ways to do just that. Their share of purchases in 2018 was about 23% (levels like this were last seen way back in 2007), with their ability to buy assisted by tapping their KiwiSaver funds for the deposit and/or a willingness to compromise on the location/property type - particularly in the priciest markets.
But what about the prices they’re actually paying to get into the market? In locations where property is generally the most expensive, FHBs have chosen (or been forced) to target the lower end of spectrum
Average price paid by FHBs in 2018 and current average value for all properties (Source: CoreLogic)
The first chart shows the average prices paid by FHBs in selected parts of NZ in 2018 versus the current average value for all properties in each area. The gap between the two numbers (or the ‘discount’) is shown above the bars. As you can see, the prices that FHBs have paid relative to the average value are lower in NZ’s most expensive markets of Auckland (18%) and Queenstown (22%),  than they are in Palmerston North (13%) where property is cheaper. What’s quite staggering is the increase in prices that FHBs have been paying in Queenstown over recent years. From a trough of about $420,000 in 2014, that figure has now risen to more than $943,000: an increase of nearly 125%. The average price paid in Queenstown by a FHB in 2018 was almost $87,000 more than in Auckland (see the second chart).
Average FHB price paid (Source: CoreLogic)
Given the high prices that they face, it’s not surprising that many FHBs struggle in the Queenstown market, where they account for just 15% of purchases in 2018 (see the third chart). It’s also no surprise that FHBs play a bigger role in cheaper markets such as Palmerston North and Invercargill - and as noted above they may well find it easier to access the better tiers of property in these markets too.
FHB % market share in 2018 (Source: CoreLogic)
Of course, when looking at FHBs’ market share against the prices they’re paying, Auckland stands out – it’s expensive, but FHBs still account for a reasonable share of activity. On face value, that seems weird but this apparent anomaly is explained by two key factors. 
First, FHB’s market share in Auckland only rose in 2018 because they found a way to “hang on” better than other buyer groups – i.e. their number of purchases has basically flat-lined in a softening market, so their % share has naturally risen (see the fourth chart).
Auckland FHB activity (Source: CoreLogic)
Second, there are obviously two sides to affordability: house prices and wages. With Auckland’s job market more heavily weighted towards higher paying sectors (e.g. banking and legal services) than, say, the tourism/hospitality-heavy Queenstown job market, FHBs in our biggest city are evidently finding it easier to compete with other buyer groups than they do in Queenstown (where accumulated wealth of other buyers is also likely to be playing a role).


Amongst other things, the CoreLogic Buyer Classification data for January shows that mortgaged multiple property owners (MPOs, i.e. investors) continued their return to the market, now accounting for 25% of purchases – up from the LVR III-induced trough of 22% in late 2017. That’s despite the government looking at extra regulations and costs for landlords, with the next key move being the rental loss tax ring-fence due in April. January’s Buyer Classification data also showed early evidence that the effects of the foreign buyer ban may be starting to kick in.   
CoreLogic property economist Kelvin Davidson writes:
At face value, you might expect that over January investors (who don’t necessarily need to buy) would normally enjoy their holiday and take a step back from the market but first home buyers (FHBs) stay active, trying to take advantage of the absence of other buyer groups. This January, however, that theory was wrong – in fact, mortgaged multiple property owners (MPOs, i.e. investors) were still active, despite again the looming tax ring-fence for rental property losses and the uncertainty around future capital gains tax.
NZ % share of property purchases (Source: CoreLogic)
As the first chart shows, the share of purchases made by mortgaged MPOs in January was 25%, the highest figure since late 2016, when their share of the market was already on the downward slope after the introduction of LVR III in October that year (requiring investors to have a 40% deposit). This undermines market speculation that extra government regulation (e.g. insulation requirements, tax changes) would cause investors to completely shut up shop.
Auckland % share of purchases (Source: CoreLogic)
On the flipside, it’s actually FHBs that have paused for a breath a little in recent months, with their share of purchases having eased down from 24% in Q3 2018 to 23% in January. That’s still an impressive figure by past standards, but suggests that FHBs may now be testing the limits of how much they can afford and/or how much they’re willing to compromise on the location or type of property.
It’s surprising, however, that this doesn’t seem to apply in Auckland. As the second chart shows, despite a typical property costing $1.05m in our biggest city, FHBs accounted for 27% of activity in January, providing stiff competition for mortgaged MPOs as the biggest individual buyer group. As an interesting contrast, in NZ’s other high-priced market, Queenstown ($1.20m), FHBs only had a minimal 7% of purchases in January (see the third chart).
Queenstown % share of purchases (Source: CoreLogic)
Another interesting aspect to January’s Buyer Classification data is that the ‘new to market’ category saw a drop (admittedly small) to 5% of activity across NZ, with most of the main centres following that pattern. New to market covers a range of different buyers, but part of it will be foreign buyers (i.e. without citizenship or a residency visa).
Activity % share for people without citizenship or residency visa (Source: Statistics NZ)
This is indicative evidence that October 22nd’s ban on foreign buyers for standalone properties in NZ is taking hold; evidence which wasn’t really shown by last Friday’s figures from Statistics NZ (see the fourth chart). That’s because the Stats NZ figures were for Q4 as a whole and there was a three-week window at the start of the quarter where it would seem that a large number of agreements were rushed through, just with a final settlement/transfer date (which is what Stats NZ reports on) at a later time in the quarter.


According to the  CoreLogic QV January House Price Index results, property values in New Zealand have grown by 0.9% since October, a slight slowdown from the figure of 1.2% in the previous three-month period. The annual growth rate also slowed, from 3.2% in December to 2.9% in January - not a large dip according to senior property economist Kelvin Davidson, regardless, it took the rate down to its lowest level since February 2012 (2.7%).
Also worthy of note in January was another small drop in the Auckland index - the 0.2% dip resulted in a minor 0.1% fall for the three month period as a whole, but more notably, a 0.9% decline over the year. Davidson said, “Once again, this illustrates the problems of low affordability in Auckland and the restrictions on lending, with plenty of listings available on the market also giving prospective buyers the chance to shop around.”
The subdued property market conditions that we saw heading into Christmas have pretty much stayed in place in January.
Index results as at 12 February 2019
“Over this holiday period, the market is always characterised by low volumes, which means caution needs to be taken when interpreting price data. Any influence of the foreign buyer ban is another factor to keep in mind.”
“Jumping to any conclusions about Auckland’s property market having entered a new weaker phase wouldn’t be advisable. After all, many solid foundations remain; an ongoing shortage of property (albeit with a reasonable amount of choice amongst the stock actually on the market), low mortgage rates which are unlikely to rise significantly in the near term, the loan to value rules have been relaxed mainly for owner-occupiers, and most people are in work.”
Davidson adds: “For Auckland, and the market as a whole, the looming tax ring-fence for rental property losses and speculation about a future capital gains tax system are some of the current headwinds. To my mind, with one month of the year now gone, the prospects for 2019 haven’t changed - it’s a balanced outlook, with overall volumes set to be similar to 2018 and value growth generally continuing to be constrained.”
“The latest results confirm that within Auckland, albeit a very broad generalisation, shows that it’s been the cheaper west and south that have fared better recently, with the more expensive north and east softer. For example, Manukau North West (current value of $785,644) has seen values rise by 1.2% over the past year, with Manukau Central also edging up, by 0.4%. By contrast, North Shore City (value of $1.2m) has experienced a 2.2% drop since January 2017. Auckland City, where values are also $1.2m, has dipped by 0.9%.”
Rolling change in property values, national
Moving down to Hamilton, the slightly inconsistent growth patterns that were evident throughout 2018 have continued on into January. A pretty decent monthly gain of 1.1% in January alone saw the annual rate rise from 5.0% to 5.9%, continuing the rebound after the drop to 4.0% in November.
Tauranga has moved similarly to Hamilton lately, with very little smoothness in its growth path for property values. After rising from 3.0% annually in October to 3.9% by December, growth dialed back again in January, to 3.3%. That was despite an increase of 2.0% in the most recent three months.
Davidson said, “That shared, ‘bumpy’ experience for Hamilton and Tauranga in recent times is despite significant differences in their economies and property markets. Hamilton has its base of professional services and the activity that arises from the needs of the agricultural sector, while Tauranga is more about the port, tourism, and horticulture as examples.
In the property market itself, our CoreLogic Buyer Classification data shows that Hamilton’s activity has recently been dominated by ‘mortgaged multiple property owners’ (MPOs i.e. investors) and first home buyers (FHBs), groups who are amongst the most keen to drive a hard bargain. Whereas in Tauranga, movers (i.e. existing owner-occupiers) account for the most activity, with their larger equity base recently contributing to values now being higher than $720,000 in the city and rising out of reach for some other locals. With affordability stretched, this may be prompting a bit of volatility in values from month to month.
House Price Index, Main Centres
Relative to December 2003
Around the wider Wellington property market, a ‘mixed bag’ is a fair way to describe recent patterns. Porirua (1.1% quarterly rise and 6.7% annually) and Wellington City (1.0% and 7.0%) remain pretty consistent areas in terms of value growth, but the Hutt Valley is showing some contrasts. In the cheaper Upper Hutt market (average values of $532,632), there’s been a spike of 5.3% since October, seeing the annual growth rate accelerate to 13.2% in January. By contrast, Lower Hutt has stalled lately, with values basically flat since October (albeit still up by 9.0% over the past 12 months).
In Christchurch and surrounding areas, the story remains generally flat for values, as supply rises to meet demand. Since October, the city’s values have risen by 0.8%, leaving the annual rate at a modest 0.6%. Banks Peninsula is a small pocket of relative strength, with values up by 3.4% since January 2017. Around the rest of Canterbury, it’s pretty typical for values to have risen more modestly, by about 2% over the past year.
By contrast, Dunedin’s market remains vigorous. With demand robust and the number of listings on the market low, values have risen by 2.9% since October and 11.1% over the past year – to now stand at $436,208. The growth is pretty consistent across all parts of Dunedin, with the active buyer groups – FHBs and mortgaged MPOs – clearly finding good options in most if not all suburbs.
Around the rest of the country, it’s the same old story – some markets running strongly and some fading to the back of the field. In New Plymouth, for example, momentum eased in January and values are now only 4.4% higher than a year ago. In the middle of last year, those gains were closer to 7%. Rotorua is another market that has seen momentum fade in the last few months.
But as a contrast, Napier has perked up lately, with values in January 4.3% higher than in October. Annual growth in Napier has bounced back up to 11.3%, with values at $538,635. Property values continue to rise at impressive rates in Whanganui (15.0% annually), Palmerston North (13.2%, on the back of a gain of 3.8% in the three months to January), and Invercargill (12.2%).
Annual change in dwelling values Provincial Centres*
*Average value at 12 February 2019 inside bar
In tying all of this together, Davidson said: “In the current market, where banks are cautious about lending and with a lingering general sense of uncertainty, it’s no surprise that overall volumes are at historically low levels or that the January House Price Index shows continued  inconsistency in value growth across areas and from month to month within areas.
We’ve always thought that 2019 could basically be 2018 on repeat and although it’s obviously early days, that’s how things have played out in the first month of the year. The Government  will soon come into focus as a key player in the property market’s fortunes, with the Tax Working Group’s recommendations about NZ’s tax system in general – and capital gains tax in particular – being  released on February 21st.”


The upswing in property values in Dunedin is likely to continue in 2019, given that demand is strong and the number of listings on the market is low. First home buyers have been very active in the market in recent months, but investors have also been keen to buy – despite the sense that the average Dunedin rental property might require more cash to bring it up to insulation standards than houses elsewhere in New Zealand. The lower starting point for values in Dunedin and higher gross rental yields are obviously outweighing any of those concerns.   
CoreLogic research analyst Kelvin Davidson writes:
Dunedin’s property market had another strong year in 2018, with average values up by 11.2%. In the past four years, they’ve risen by 48.8% - that’s an increase of $142,683, from $292,220 to $434,903 (see the first chart). So, what’s going on in our southern-most main centre?
In terms of values, the growth in the city-wide figure has been broad-based and not just centred on a few areas. From 10.5% in Dunedin South to 12.7% in Taieri, that’s a pretty tight range for the increase in average values last year. At the detailed suburb level, the best performer last year was North Dunedin with a rise in median value* of 18.8% ($91,600). Sales data also shows the city’s strength. The top house sale in 2018 was on Grendon Street (Maori Hill) for $1.45m, well above the CV of $1.05m (albeit those CVs were set back in July 2016).
Average property values (Source: CoreLogic)
The demand and supply picture has anecdotal reports of soaring demand, with banks receiving multiple mortgage applications on the same day for the same property. The CoreLogic Buyer Classification series shows that the key players lately have been first home buyers (FHBs) and mortgaged multiple property owners. FHBs in particular surged in 2018, raising their share of purchases from 24% at the end of 2017 to 28% in Q4 2018 – easily a record high for that buyer group (see the second chart).
Dunedin buying activity, % of total (Source: CoreLogic)
For FHBs, the lower (but quickly rising) values are one factor in Dunedin’s favour compared to the other main centres. For investors, the lower values are also a benefit, because (as the third chart shows) they set the scene for higher gross rental yields – currently more than 4%, versus less than 4% elsewhere and closer to only 2% in Auckland. Even though you might expect the extra requirements for insulation etc in Dunedin rental properties to be a big issue, the figures show that, even if it is an issue, it isn’t currently deterring investors.
Dunedin gross rental yields and rental growth (Sources: CoreLogic, MBIE)
DOn the supply side of the market, things are also tight. As the fourth chart shows, total listings (yellow line) across the wider Otago region are at low levels, with Dunedin likely to be the same – and a restricted number of properties available to buy will be helping to push up values.
Otago listings (Source: CoreLogic)
All in all, with demand strong and listings low, average property values in Dunedin look set to continue to rise this year. Granted, the longer and higher values rise, the more likely it is that current owners who have been watching the market will take the plunge and look to “cash in” - at which point, the associated rise in listings would subsequently take some of the steam out of price gains. However, for 2019 at least, this possible effect doesn’t seem likely to be a game-changer for Dunedin and it’s set for another strong run.


The Revival of the Humble Arch

Wednesday, 6 February 2019

Although it hit its stride in the 80s, the humble arch has since been brushed aside, (or demolished rather) from the homes of the 2000s. Young renovators purchasing old homes littered with archways and proceed to eradicate them from the space almost immediately in an effort to modernise their new home. Although the romance of the arch had been forgotten, it is making a come back. Ethereal archways are slowly being introduced back into your interiors, sometimes in places you least expect. When fused with modern elements, the humble arch is at its best. Reminiscent of Mediterranean style and coastal origins, integrating archways into your home is not only inspired but a fresh take on a classic style that has since lost its allure to the untrained eye.
We’ll start with the most predictable hot spots but archways have become increasingly popular as door or entry ways between rooms. Rather than demolishing the arch entirely, narrow arches are being worked into a wider version to allow for an open plan feel while maintaining the soft shape and character of the archway. Arches are also being introduced into pantries and walk in robes amplifying the charm of the space as well as encouraging a free flowing environment. 
When choosing how to best add this shape into your home, it is critical to consider your space and the other elements within it.  If you’re considering a permanent arch entryway take a look around first. You might have a dated, vintage cornice that you’re not particularly fond of, in which case, remove one aged element in your room to complement the arch you want to hero. By modernising your cornice you create the perfect base to allow the archway to elevate your home with it’s minimal accompaniments.
If you’re not interested in creating a permanent fixture that you’re not completely sold on, (just yet) then perhaps you should consider other ways to enlarge your space, introduce light and reimagine the archway - enter the mirror. Whether you opt for a full length, 2 meter wide masterpiece (if only I had the wall space!) or for a low-line arch mirror to sit on top of your dresser, integrating this soft, romantic shape into your interiors styling perfect complements your modern finishes.
You can begin to bring this in small doses through pillows (an easy fix) or even art and sculpture to see how it may look and feel within your home. On this occasion don’t run in with your sledgehammer just yet. Move in, live a little and work through what feels right in your home. Don’t write it off just yet - give your arch a chance to shine.