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- November
In today’s market, it can be cheaper to upgrade to a new home rather than improve your existing home | Anne Porter
Posted: 30th November -0001
With second-hand residential property still selling below the price peaks of 2007, it can sometimes make good sense to sell and upgrade to a bigger home rather than to improve or extend your existing home, says Lanice Steward, MD of the Cape estate agency Anne Porter Knight Frank.
“When families need more room because the children are becoming teenagers (and need their own space) or grandparents are coming to stay, a guest suite, a work room or a study are now essential (or for the 101 other reasons which make extensions necessary), it can be exciting to extend an existing home. Many of us have done this at some stage in our lives and can testify that despite the difficulties with builders and planning authorities, it can be a rewarding experience.
“Nevertheless, if the owner takes a detached, unemotional look at the cost of these improvements (bearing in mind not just the building costs but also in the often over-looked architect and municipal plan approval fees), it can be much cheaper simply to sell and move up a notch or two on the home owning ladder.”
A big danger of extending and upgrading, said Steward, is that it can lead to the owners spending far more than originally proposed and to over-capitalising. They then end up with a home that is well above the average value for the area.
“That is not necessarily a drawback in the long run, i.e. if you plan to stay here for another decade or so, but it can be a big problem if the owner has to move or is forced by a reversal in his fortunes to downgrade. At Anne Porter Knight Frank we have seen improved properties sold within three or four years fail to recoup more than just half the capital sum put into the building. An upwardly mobile executive will spend, say, R3 million on making his home more attractive, only to find himself transferred and, on selling, unable to recoup more than R1,5 million of the outlay because the home, although much admired, is now too expensive for the market in that particular area.”
Steward said that in situations like this Anne Porter Knight Frank should be consulted to give an estimate on the home’s current value and its future possible value after the extensions have been carried out. Such estimates, she said, can lead to people reconsidering the cost of the improvements until the market improves.
For further information contact Lanice Steward on 021 671 9120 or email lanice@anneporter.co.za.
“When families need more room because the children are becoming teenagers (and need their own space) or grandparents are coming to stay, a guest suite, a work room or a study are now essential (or for the 101 other reasons which make extensions necessary), it can be exciting to extend an existing home. Many of us have done this at some stage in our lives and can testify that despite the difficulties with builders and planning authorities, it can be a rewarding experience.
“Nevertheless, if the owner takes a detached, unemotional look at the cost of these improvements (bearing in mind not just the building costs but also in the often over-looked architect and municipal plan approval fees), it can be much cheaper simply to sell and move up a notch or two on the home owning ladder.”
A big danger of extending and upgrading, said Steward, is that it can lead to the owners spending far more than originally proposed and to over-capitalising. They then end up with a home that is well above the average value for the area.
“That is not necessarily a drawback in the long run, i.e. if you plan to stay here for another decade or so, but it can be a big problem if the owner has to move or is forced by a reversal in his fortunes to downgrade. At Anne Porter Knight Frank we have seen improved properties sold within three or four years fail to recoup more than just half the capital sum put into the building. An upwardly mobile executive will spend, say, R3 million on making his home more attractive, only to find himself transferred and, on selling, unable to recoup more than R1,5 million of the outlay because the home, although much admired, is now too expensive for the market in that particular area.”
Steward said that in situations like this Anne Porter Knight Frank should be consulted to give an estimate on the home’s current value and its future possible value after the extensions have been carried out. Such estimates, she said, can lead to people reconsidering the cost of the improvements until the market improves.
For further information contact Lanice Steward on 021 671 9120 or email lanice@anneporter.co.za.
Posted by: Anne Porter Knight Frank
