Renovate, or relocate?
It may cost you less to move than improve, and be less risky, says Berry Everitt, CEO of the Chas Everitt International property group.
After a while, most owners find that there are some things about their home they would really like to change – either by making alterations or by moving.
“Of course the problem might be something beyond your control, like the fact that your once-quiet street has become much busier and noisier over time, or that a new development or two has changed the character of your suburb, or that your employer has moved premises and you now face a longer commute to work,” says Everitt.
“And in such instances moving will usually be the best as well as the most obvious solution.”
But more often, he says, the desired change will relate to such things as the birth of a new baby, your children transitioning from primary to secondary school, an aging parent needing accommodation or even grown children needing to return home.
“It can also have to do with the need to do more entertaining at home (as we have all had to do in the past two years) or the need for space to accommodate a home office or home-based business. And it’s when these things happen that owners usually start to think seriously about remodelling their home to create more space rather than moving, especially if they still like the area they live in.
“Indeed, more than R7,3bn worth of additions and alterations were made to SA homes last year, according to StatsSA.”
The question is, does this make sense financially? Will the cost of the additions or alterations you want to make really be less than the cost of selling your home and moving to a bigger one? And if the value of your home is already pretty close to the price ceiling for your area, what is the risk attached to spending a lot of money on renovations?
Writing in the Property Signposts newsletter, Everitt says the truth is that you will very seldom be able to recover the full costs of any additions or alterations you make if you should for some reason need to sell your home soon afterwards.
“Yes, the changes will probably add to the appeal of your home, but they will most likely not add anything to the price that buyers are willing to pay – which will still need to be competitive for your area.”
What this means is that to get the full benefit of any changes you make, you will need to be pretty sure that they will make it possible and comfortable for you and your family to stay in your home for at least the next few years.
He says other vital issues to consider before you decide to renovate rather than relocate include the fact that your local authority or homeowners’ association may not even allow you to make the additions or alterations you want. You will need to find out before you go any further.
“In addition, most renovations turn out to be much more expensive than expected and will most likely increase your debt. On the other hand, if you’ve been paying your bond for a few years and live in an area where prices have gone up, you probably already have enough equity in your home for a significant deposit on a new one.
“Also, if you really like your area, there’s no rule that says you can’t just move to a bigger home up the road rather than to a different suburb. You should consult with a qualified and experienced local estate agent to explore your options.
“And finally, you should be aware that as a repeat buyer it is easier to qualify for a new home loan now than it was a few years ago. The banks are actively competing for business and if you have a low debt load, clean credit record and a sizeable deposit from the sale of your current home, you may well qualify for an interest rate concession that will lower your monthly bond repayments and enable you to save thousands on the total cost of a new home.
You should seek advice on this score from a reputable bond originator and, if you do then decide to go house-hunting, make sure you obtain bond pre-qualification first.”