Ouse Prices: Home Improvements Are A Waste Of Money

[Mikhail Liebenstein]

http://www.telegraph.co.uk/money/main.jhtm.../ymhomes122.xml

Apologies for posting something on the news blog, but I thought this worth of posting for discussion.

In a previous post I referred to couple I know who are chronically overpaid for a house in Surrey, by what I reckon to be close to £350k. The house was an ex-builder's house, and at the time I think they thought the loft conversion and extension somehow added lots extra value - in my opinion a lot of the extra space is unusable unless your a friend of Snow White. I believe all the work could have been done for £120k, so on the basis of the article, the house is only worth perhaps £80k more than neighbouring properties that are of the same initial size.

To my reckoning that makes the house worth no more that £900k, now this does not stack up well with the £1.25m they paid for it, plus almost another £50k of stamp duty.

Any thoughts? Other similar disasters?

Edited July 23, 2008 by mikelivingstone

[Nelly]

Most home improvements I work on for people (see sig) like extentions are firstly because they need more space and not necassarily to add value (allthough that allways gets mentioned)

There have been quite a few who extend, after looking at moving, but found extending worked out cheaper then moving.

One thing I have seen a lot of lately is those who bought councill houses. They got them real cheap had a big valueation put on them, then decided to move to 'a better area' but all they can afford is a similar if not smaller house. Most councill houses were designed and built for families and are a decent size, unlike new builds that a tiny.

[Mikhail Liebenstein]

Most home improvements I work on for people (see sig) like extentions are firstly because they need more space and not necassarily to add value (allthough that allways gets mentioned)

There have been quite a few who extend, after looking at moving, but found extending worked out cheaper then moving.

One thing I have seen a lot of lately is those who bought councill houses. They got them real cheap had a big valueation put on them, then decided to move to 'a better area' but all they can afford is a similar if not smaller house. Most councill houses were designed and built for families and are a decent size, unlike new builds that a tiny.

Nelly, you do make a good point as relative to moving (especially with higher levels of stamp duty) the costs of extending can be very reasonable.

That said the article I guess is talking about the case where people do the work in the hope of selling on for a quick buck. This used to work and some huge profits were apparently made whilst the market was rising, though it is perhaps hard to separate the real value added from the general effect of a rising market. I have bought and sold 3 homes in the last 8 years, and apart from paint and in once case a kitchen and bathroom I have spent very little. Strangely, I think I have now ended up with more equity than the people I know who have had lots of home improvements done.

The rising tide of HPI does tend to give a false impression, but on the way down the negative effect is very pronounced.

[stuckmojo]

A bit overkill I think.

I own a house in the alps and I am spending money on it to add solar panels, swimming pool, wood burning stove etc. It makes sense for me because I intend to keep it for life as it's my family heritage.

It does have a point on the waste of money on "temporarily owned" property

[Popette]

Crikey, who would have thought 18 months ago.

I bet Homebase are pleased to hear.

I can't say I am not happy to read this though. I remember how utterly sick I used to be when we lived in Guildford 5 years ago. HPI was gaining momentum scarily fast and we were renting without a chance in hell of ever buying a house there (not even the scummiest flat, everything was beyond our reach in 2003). So every time I saw Sarah Beeny on TV advising some morons to spend the least possible, go for the cheapest fittings, and the minimum work they could get away with to protect their PROFIT, I used to cringe and feel sick. So id this means one less person making 50K after painting a crap house magnolia, throwing some original fireplaces in a skip, fitting the cheapest kitchen and a second hand bath tub from ebay...then so be it.

[rockhopper]

we are thinking of moving , maybe next year and we will be doing up the

whole house , mainly a lick of magnolia , but the bathroom and kitchen will be

done (by me) . I expect the kitchen to be 3k max for a new set of BnQ kitchen units ,

and the bathroom to be 2k tops (bath,sink + units + shower).

The house is definitely in need of smartening up , and the aim is bring the price up to

the normal value for this type of house, and to make it attractive to the punters.

I think that some of the home improvements if done well as diy should at least match

the cost of doing them and improve the 'saleability'.

[The Conveyancer]

Most home improvements I work on for people (see sig) like extentions are firstly because they need more space and not necassarily to add value (allthough that allways gets mentioned)

There have been quite a few who extend, after looking at moving, but found extending worked out cheaper then moving.

One thing I have seen a lot of lately is those who bought councill houses. They got them real cheap had a big valueation put on them, then decided to move to 'a better area' but all they can afford is a similar if not smaller house. Most councill houses were designed and built for families and are a decent size, unlike new builds that a tiny.

I agree with you, an ex local authority house in a good area is not a bad buy. Just make sure that most of the other houses around you have been privately bought as well. The gardens are usually a good size as are the room sizes. Quite often their are large storage cupboards and the properties seem to be built alot better than many, especially modern new builds. I would much rather an old council house than a new build!

[FLASH_2007]

I remember looking at terraced houses in 01 and there was a £3,000 difference between one with updated decor, kitchen bathrooms etc now this is more like £15,000. It will be interesting to see if this reverts back to around £5000 perhaps.

[grey shark]

Not quite home improvements , but more like 'attempted garden improvements' ..... as a lot of houses we may be interested in have had there gardens completly ruined , with to many awful looking features , far to much decking and paving , odd patches of gravel with one plant in the middle of it , strange wooden structures that serve no purpose , and all because the owners saw a gardening programme on the telly telling them it was the latest must have ......total crap most of it , give me a lawn and a few shrubs dotted around anytime .

[Mr Nice]

similar things were reported in America as the slump progressed.

one of the main reasons mentioned, that they didn't mention in the article, was that say you had two identical houses, one updated, one not.

the updated one might have 10k put into it, but they aren't usually the exact same 10k of improvements that a potential buyer might have picked, so they don't tend to give them full value.

if you are going to have to spend the 10k on improvements, you might as well be able to pick out the exact ones you want.

if that makes any sense

Edited July 23, 2008 by Mr Nice

[abharrisson]

http://www.telegraph.co.uk/money/main.jhtm.../ymhomes122.xml

Apologies for posting something on the news blog, but I thought this worth of posting for discussion.

In a previous post I referred to couple I know who are chronically overpaid for a house in Surrey, by what I reckon to be close to £350k. The house was an ex-builder's house, and at the time I think they thought the loft conversion and extension somehow added lots extra value - in my opinion a lot of the extra space is unusable unless your a friend of Snow White. I believe all the work could have been done for £120k, so on the basis of the article, the house is only worth perhaps £80k more than neighbouring properties that are of the same initial size.

To my reckoning that makes the house worth no more that £900k, now this does not stack up well with the £1.25m they paid for it, plus almost another £50k of stamp duty.

Any thoughts? Other similar disasters?

I am looking at an extension at the moment... to be frank I'll probably do it although the cost is going to be around £85k and reallistically its going to add some value but I suspect when the property market reaches its bottom it'll only exacerbate the losses..... but I want to do it for quality of life and as I am going to stay here for ten years.. I figure lifes too short why not ?.... my numbers are going to be something like bought at 360 worth about 400, post 85 k its going to be worth around 450, post a 20% reduction itll be around 360 again..... so I would have effectively lost 85k.... without the extension property will be worth around 320 so would have lost 40k..... either way its only numbers as I will be staying there and to be frank if I did the other thing which would be to sell and spend the 85k on a bigger house, once I have factored in agents fees and stamp duty and finance costs and any intial redecorating etc to the new place I doubt it'd be achievable for an additional 85k... of course the chances of me being able to buy and sell in this market are precisely zero anyway.

The wider problem of course is that with declining prices I can see a situation where builders are perhaps going to be seeing things as uneconomic to build when they get to the bottom of the cycle.... they may accept less profit, they may buy the land for less etc but building costs are rising massively I think while prices are falling (basically as I understand it the cost of the raw materials... steel, concrete, bricks , paint, nails you name it are all adversely affected by the price of oil so that some are up 30% in a few months or more.. I heard the other day sheet steel doubled over a few months but haven't confirmed it)..... the upshot of course may well be less new build houses being available at the bottom of the market just when all those who have been holding off and holding off want to start buying again........ I suspect it may lack of availablility may perversely re-ignite another boom once we get to the bottom of this little cycle.

[Guest tbatst2000]

I think it's sad that the article assumes the only reason someone spends money on their house is to add financial value to it. What about the intangible value of living somewhere that you've made nicer through your own efforts (or, indirectly, by paying a builder)? Going back to the money point though, you can spend quite a lot on a house before it costs you more than all the tax and fees that you'd be stung for if you moved, so it might make sense anyway. Also, despite what anyone thinks, I'm certain that a house with a decent kitchen/bathroom/etc will sell quicker than one that's a wreck even if not for that much money (a quick sale is worth money in a falling market to many people after all).

[Freeholder]

There are two things that people get wrong doing home improvements that I have seen hundreds of times.

DIY Most people do not have the skills to do the work to an acceptable standard. If you have I take my hat off to you but I have seen all manner of horrorshows. It is rather difficult when somebody is proud of the mess they have made.

Overspending. More money spent does not equal more value added. A modest house with a new kitchen might be worth £5,000 or so more than one wth the rotting remains of a worn out kitchen. Putting a £15,000 designer kitchen into the same house will add no more money than a £5,000 B&Q item.

[dances with sheeple]

The whole asset class called "house" is in the process of getting zeros knocked off the price. Any improvements now are just a waste of time. In the boom people were brainwshed by TV to get their house looking a certain way (modern, clean, trendy, no personal tastes) and when sheep were spending money they had no concept of paying back, the "makeover" houses probably shifted before the " This is my shrine to Elvis" houses. Now, doing improvements to increase chances of a sale are like trying to shave and brush your teeth while the interview panel tell you they don`t hire scruffy people. It`s WAY too late for sellers to do anything but clench their buttocks and have a go at the wine supplies they bought on MEW. Did you see Declan this morning? he was preaching straight from this web-site, and actually talking sense for the first time. The jig really is up now.

[Mrs Bear]

we are thinking of moving , maybe next year and we will be doing up the

whole house , mainly a lick of magnolia , but the bathroom and kitchen will be

done (by me) . I expect the kitchen to be 3k max for a new set of BnQ kitchen units ,

and the bathroom to be 2k tops (bath,sink + units + shower).

The house is definitely in need of smartening up , and the aim is bring the price up to

the normal value for this type of house, and to make it attractive to the punters.

I think that some of the home improvements if done well as diy should at least match

the cost of doing them and improve the 'saleability'.

Why don't you just leave it as it is and reduce the price?

I've been put off properties simply because someone's put in a cheap old 'this'll do' kitchen/bathroom in order to sell it. You can almost always tell, and then you're faced with living with poor 2nd best or wastefully ripping it out.

Would far rather pay a bit less and do it myself, with a lot more care and thought (and not necessarily much more money) than most vendors bother with.

But then unlike a lot of buyers the sight of an avocado bathroom does not send me into shock-horror fits.

[winkie]

Why don't you just leave it as it is and reduce the price?

I've been put off properties simply because someone's put in a cheap old 'this'll do' kitchen/bathroom in order to sell it. You can almost always tell, and then you're faced with living with poor 2nd best or wastefully ripping it out.

Would far rather pay a bit less and do it myself, with a lot more care and thought (and not necessarily much more money) than most vendors bother with.

But then unlike a lot of buyers the sight of an avocado bathroom does not send me into shock-horror fits.

I agree, the location is what matters, the light and the view and to a certain extent what space or available space you are getting for your money...no fancy kitchens and bathrooms thank you very much...like all fashions they go around and come around...also nice to be a bit different, fed up with beech kitchen units, white bathroom suite, laminate floor and cream walls.

[dances with sheeple]

Did anyone see declan this morning? for me an absolutely pivotal moment.

[Guest tbatst2000]

Overspending. More money spent does not equal more value added. A modest house with a new kitchen might be worth £5,000 or so more than one wth the rotting remains of a worn out kitchen. Putting a £15,000 designer kitchen into the same house will add no more money than a £5,000 B&Q item.

That may be true, but people don't just put in expensive kitchens because they think it'll add more value. Many, possibly most, do it because they want an expensive kitchen for the house they live in. By the 'get the cheapest that looks ok' logic, the whole country would be driving around in Ford Mondeos or whatever, why should kitchens be any different?

[DemolitionRed]

A few years ago we bought a house, added an extension, got the basement dug out and did various other things to it. We had a huge mortgage, borrowed more to do the work, sold at a profit, paid back the bank and came away smiling.

Those days are gone.

.

To do a house up to live in and enjoy is very different from doing your house to increase its value.

We have an old tumble down Georgian house in Lincoln. It cost very little, will be expensive to do up but we have absolutely no intentions of ever selling it.

[bendy]

Not quite home improvements , but more like 'attempted garden improvements' ..... as a lot of houses we may be interested in have had there gardens completly ruined , with to many awful looking features , far to much decking and paving , odd patches of gravel with one plant in the middle of it , strange wooden structures that serve no purpose , and all because the owners saw a gardening programme on the telly telling them it was the latest must have ......total crap most of it , give me a lawn and a few shrubs dotted around anytime .

totally agree.

low maintenence garden = low maintenence people - do not buy a house from these lot.

plus getting these gardens back to proper gardens will cost far more than it did for them to brick it over!

[Authoritarian]

Its an interesting investment.

The land beneath the property is losing value whilst at the same time decent improvements to the building will add value. Property investors have just been lucky over the past decade though due to a 'rising market'.

[juvenal]

The whole asset class called "house" is in the process of getting zeros knocked off the price. It`s WAY too late for sellers to do anything but clench their buttocks and have a go at the wine supplies they bought on MEW.

A very fine turn of phrase...

[Selling up]

There was a great article linked on the site here a couple of weeks ago (I don't know how to go about finding it) saying:

Now prices are falling, suddenly all those "investments" in posh kitchens etc are no longer investments at all, but just consumer spending.

Fine, if you want a posh kitchen and you're able and willing to pay for it then knock yourself out.

But there will be a large group of people who have hitherto justified such luxuries on "investment" grounds. How much longer will they be able to do so?

[Mr Nice]

There was a great article linked on the site here a couple of weeks ago (I don't know how to go about finding it) saying:

Now prices are falling, suddenly all those "investments" in posh kitchens etc are no longer investments at all, but just consumer spending.

Fine, if you want a posh kitchen and you're able and willing to pay for it then knock yourself out.

But there will be a large group of people who have hitherto justified such luxuries on "investment" grounds. How much longer will they be able to do so?

until 11 months ago

the kitchens of many of the new/refurbished housing always struck me as the strangest part of the housing boom.

people that up until they became "developers" (which seemed like it was 3/4 of the population) that up until then had barely ever boiled water in their kitchen, all of a sudden couldn't live without restaurant grade appliances in their house.

I wonder how man Sub-Zero refrigerators ended up holding a bit of chinese take-away and a gallon of past the use-by date milk.

[BlueRat]

until 11 months ago

the kitchens of many of the new/refurbished housing always struck me as the strangest part of the housing boom.

people that up until they became "developers" (which seemed like it was 3/4 of the population) that up until then had barely ever boiled water in their kitchen, all of a sudden couldn't live without restaurant grade appliances in their house.

I wonder how man Sub-Zero refrigerators ended up holding a bit of chinese take-away and a gallon of past the use-by date milk.

I remember on one of those property programmes some loonies had two ovens put in for reasons of "symmetry".