There are many ways to alter your home, from simple projects for basic improvement to glamorous and comfort additions. But as a return on your investment, is it worth overhauling the kitchen, adding an island, granite countertops and stainless-steel appliances, or is it more cost effective to paint the room and stick new doors on the cabinets? Will a spa pool raise the value of the house, or simply be a perk while you're living there?
Each year for nearly two decades, Remodelling magazine has published a survey detailing how much money homeowners in the United States can expect to recoup from renovation investments. From cladding the outer walls to adding on a lavish new master suite, the report details costs and returns for more than a dozen projects.
A "mid-range" bathroom renovation or cladding the house with fibre-cement were the projects found to return the highest value on average, according to Remodelling's 2005 Cost vs. Value Report. Once they sell, US homeowners can expect to recoup an average of 102.2 per cent of their investment for a mid-range bathroom renovation (simply replacing and updating the fixtures and fittings), and 103.6 per cent for the cladding.
A fancier renovation of the bathroom, however, was only likely to return 93.2 per cent on the investment, while the homeowner who added a new home office could expect to recoup 74 per cent on average.
The report found that spending more doesn't mean you will get back a higher percentage of your money later on. For instance, on a luxury kitchen makeover, which involves installing imported fittings, stainless steel appliances, stone countertops etc, the average recouped value is about 85 per cent. In contrast, a less-expensive, "minor" kitchen renovation project - replacing cabinet fronts, upgrading the stove and oven with energy-efficient versions, painting trim and replacing laminate countertops, sink, flooring and wall coverings - was found to return 98.5 per cent on the owner's investment.
Furthermore, if you're looking to get your money back when you sell, it's a good idea to avoid the unusual, according to the report. Kitchens and bathrooms generally tend to recoup their cost, whereas additions which are idiosyncratic and customised to the homeowners' individual tastes, such as wine cellars, home theatres, a bathroom for every member of the family, will not appeal to the wider market.
Even things like fancy swimming pools or tennis courts can appeal to some buyers, while others may see it as a liability. Potential return often depends on the regional market, the neighbourhood and characteristics of the individual home. In a neighbourhood where homes have two to three bathrooms, a house with one bathroom will see a great return on a second, while putting a new bathroom into a home with four already probably wouldn't see much return at all.
Footnote:
aussieproperty.com has a unique financial tool in our Property Invetsors Tool Box, called the Renovation Expense Assessor, that can help you decide if renovation costs are justifiable on your property by looking at the required rental increase, based on the expenditure.
