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.
An online property valuation will give you an indication of the area trend. This way you can compare actual sold prices and use it to guide you in deciding whether it would in be your best interest to sell or renovate.
“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, says Steward, 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, says 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.
She says that at Anne Porter Knight Frank they 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.”
An estate agent can 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 says, can lead to people reconsidering the cost of the improvements until the market improves.
An online property valuation will give you an indication of what other similar homes in your area, street or suburb are selling for. This way you can compare actual sold prices and work out whether it would be in your best interest to sell or renovate. It is difficult to predict the future and if you intend to stay put for a long time you may realise the value in time, but at least you will get some idea of the market trend in your area.
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