Don't Waste Thousands On This Property Mistake
Why home improvements are no longer a money spinner.
Research from Abbey claims 8.3 million of us will be trying our hands at home improvement projects over the coming year. Are you one of them? If so, listen up...
If you want a des res without the hassle of moving, then home improvements could be the perfect solution. But, if you were hoping to add value to your home with a DIY project, then you may need to think again.
A false economy
Estate agents warn that the cost of most home improvements is now likely to outstrip the value they add to the price of your property. Of course, this is all down to falling house prices, which means that improvements which were once profitable are now often a false economy.
Not so very long ago, estate agents readily advised that home improvements were a cost effective way of upping the asking price. In fact, as recently as last October, my fellow Fool, Donna Werbner, reported that the right home improvements could add as much as £22,300 to the value of your home. (If you want to find out more, read Which Home Improvements Add The Most Value?)
That seemed a sensible recommendation at the time, but how quickly things change. Back then you could make well over £20,000 by adding an extension to your home. But now, Abbey reckons you're likely to lose £20,000! It claims the cost of the project is likely to exceed what you would make if the property was sold as soon as the work is finished.
Just take a look at the table below which shows how most home improvements -- carried out in the hope of boosting property prices -- now result in a negative `net added value':
Which home improvements can lose/make you money?
Average added value
Average cost of improvement
Net added value
Energy saving upgrades - e.g. solar panels and water recycling
Cosmetic improvements - e.g. painting and decorating
Source: The Property Makeover Price Guide, BCIS/RICS - June 2008.
As you can see from the table, popular home improvements could cost you thousands more than they add to the value of your property. For instance, an extension could leave you out of pocket by an astonishing £20,232, while a new kitchen or conservatory could each pour almost £14,000 down the drain.
Meanwhile, energy saving upgrades -- while great for the environment -- are apparently a no-no for increasing your asking price. Here the costs could run to well over £12,000, but add just £1,028 onto the value of the average property.
That said, the table only looks at the value added to the average property and the average cost for each DIY project. Your own property may be a completely different kettle of fish. If you think home improvements could still add value, then do your research before you spend anything. Ask a local estate agent if they think it's worth your while and find out what buyers in your area are really looking for.
On top of that, you may be able to pay a lot less than the figures shown for the improvements you have in mind by shopping around for cheaper materials and labour. And you can make sure you don't waste money needlessly by taking out a loan or a mortgage with a high interest rate. (Read How To Pay For Home Improvements for help on how to avoid this.)
Still, in a falling property market, it makes sense to keep a close rein on how much you spend on home improvements. If your bathroom or kitchen is in urgent need of an update, try to do the work as inexpensively as you can. Homebase, for example, is offering this bathroom suite for the rock bottom price of just £299.99.
And before you rip out your old kitchen and renovate it in the hope of enticing buyers, think about replacing the cupboard doors and handles for a modernised look that won't cost a small fortune.
Similarly, a tidy garden will help to make the right impression on prospective buyers, but you may want to think twice before shelling out £2,500 for the landscaping bill!
Grab your paintbrush!
It's interesting that the only improvement which Abbey reckons can still increase your asking price is simple cosmetic work -- such as a new lick of paint and a spot of redecorating. In fact, the lender claims a good makeover for your home could add well over £2,000 onto its price tag, even in today's market.
At least, we can probably all manage a bit of sprucing up -- even if you're DIY-phobic! And it is also one of the few improvements estate agents still recommend for getting a higher price for your home.
It seems to me Channel 5's House Doctor probably has the right idea for selling your property at the best possible price. De-cluttering and making the interior of your home more appealing certainly seems the way to go if you need to sell up this summer. What's more, it won't involve you forking out thousands of pounds first, or living on a building site for weeks on end.
Sadly, I doubt smartening up your home -- however stylishly done -- will counter falling house prices, but it certainly beats spending a fortune on improvements which won't necessarily increase your asking price and you won't actually get to enjoy yourself.
Of course, if you're enhancing your home simply because you want a nicer place to live, then feel free to ignore this article completely and go for it!
> If you're planning a home improvement and are looking for mortgage funding, get professional advice from our award-winning mortgage service!