Renovators Risk Resale Value with Poor Design

Archicentre, the building advisory service of the Australian Institute of Architects today warned people renovating properties for resale and investment purposes that they could devalue their properties with poorly planned and constructed renovations.

A recent extension to a property incorporating the outdoor setting and adding an extra dining / entertaining area.

The warning comes at a time when the $20 billion renovation industry is set to play an extended role in the Australian building industry with people investing the $50,000 to $60,000 it costs to move in renovating their homes and staying put.

Historic low interest rates and the availability of tradesmen due to the new housing downturn are a further catalyst for the renovation activity.

David Hallett, General Manager of Archicentre said unfortunately many people invest in property to secure their financial future without a planned strategy or any idea of the cost of renovating their home or investment property.

"One of the more disturbing issues is that some people actually devalue their investments with poorly conceived designs or inappropriate materials, providing a negative cash flow for the investments and poor re-selling options."

Mr Hallett said that some of the worst examples we have seen involve period houses where poorly designed flat roof extensions have been added, houses painted in garish colours, and money poured into expensive bathroom and kitchen fittings at the expense of light and space.

"Another costly mistake is to inadvertently change the house from one market segment to another, for example converting the third bedroom of a three bedroom house into a walk in robe and en suite will change the house from a three bedroom house to a two bedroom one with a drop in value of possibly $100,000 after spending perhaps $40,000 on the project

"The renovation decisions people make today will certainly impact on the resale value of their property and the extent of their retirement funds in the future.

"The basics of planning and costing the renovation to work within an available budget, combined with a clear understanding of how to tender the work out and manage the renovation project, is fundamental to the success of any renovation."

Mr. Hallett said that a well planned and executed renovation or extension could see the owners recoup their investment with perhaps a 50% tax free capital gain and a greatly enhanced lifestyle while concurrently enjoying the benefits of a greatly improved home for a long-term future.

Last year Archicentre architects undertook twenty thousand inspection, design and renovation reports for home owners on property valued at in excess of $8 billion and we found that many people needed assistance in visualising their renovation.

"This is an important element of a successful renovation as Archicentre is often called in when a renovation is half way through and people recognise that the renovation will not deliver what they envisaged.

"At this stage it is very difficult to reverse a badly designed renovation where a lot of money has already been spent, however, this is the risk people run if they have not followed careful and professional planning.

"With an ageing population many of today's baby boomers are purchasing homes to renovate and live in with a view to gaining capital on their resale when they move to smaller or assisted accommodation in their later years. For this group of renovators the success of the renovation can have a major impact on their financial future."

Some tips for renovating a property for maximum return include:

Purchasing a property that is structurally sound.

Assessing the financial potential with a design and cost analysis before purchase.

Ensuring the structure is capable of supporting the renovation or extension.

Checking the planning regulations to avoid costly planning appeals.

Ensuring the design, finishes and fittings do not over capitalise the property.

Utilising design to deliver lifestyle requirements being demanded by the market.

Creating a design where additions are compatible with the existing structure.

Obtaining competitive building or sub contract prices

Archicentre has developed an on line checklist for investors to provide an awareness of the main issues involved in renovating for maximum investment return which is available at http://www.archicentre.com.au/survival_kit/diy_home_reno2008.pdf

www.archicentre.com.au

Media Enquiries:
David Hallett General Manager Archicentre (03) 9819 4577 Mobile: 0439 439 115
Ron Smith Corporate Media Communications Archicentre (03) 9818 5700 Mobile: 0417 329 201

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