A kitchen or bathroom renovation won’t deliver a windfall: Smartline

A kitchen or bathroom renovation won’t deliver a windfall: Smartline
Jennifer DukeDecember 7, 2014

It’s common investment talk that to do up a property with a new kitchen or bathroom should reap you thousands of dollars in added value.

However, this might not actually be so, according to Smartline Personal Mortgage Advisers’ executive director Joe Sirianni.

“Minor renovations are more likely to have an impact with a unit,” Sirianni said.

“But with a house, superficial renovations may make a property more saleable, not necessarily produce a greater value – particularly given that in Australia a large proportion of a property’s value is in the land.”

In fact, in many cases superficial renovations have the potential to result in a slight increase in purchase price, and perhaps more buyers, but usually attracts the people who are already looking.

“It’s not the new floorboards, a new kitchen or a renovated bathroom that will have the banks’ valuers applying additional value to a property,” said Sirianni.

Structural improvements, however, do have the potential to have an impact on a valuation.

This could include adding bathrooms or bedrooms, and possibly adding a new garage.

For home buyers who are looking to undertake “non structural” renovations, then the bank often lends without a new valuation.

“People who improve the look of a home with non-structural renovations generally don’t understand that’s all they have done – that is, take away the run-down look of the property,” Sirianni said.

“They haven’t added bedrooms, bathrooms, a garage or anything that will put it into a new category for buyers.”

As a result, it’s usually looked at in the same way by valuers.

“It’s acknowledged that you spent, say, $50,000 on it, but they know that you’re very unlikely to get more than your $50,000 return on it,” he said.

“Quite often the banks won’t even match the valuation to what you’ve spent unless there’s a big structural improvement.”

Jennifer Duke

Jennifer Duke was a property writer at Property Observer

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