Home > Home truths, adding value

by Jason Wilkinson

So who decides the true value of a house? Will the number of bedrooms you have directly influence that value? Are swimming pools a good or bad investment?  Will a granny annexe or home office pay for itself in years to come? Apart from location there are a number of factors which will guarantee that your newly built or renovated house will stand out from the rest and ensure maximum returns for your investment – but not all ‘improvements’ are a safe bet, so here are some VATs (Value Adding Tips).

LOCATION

It’s important to do your homework if you plan to move to a new part of the country. An apparently quiet neighbourhood may be bracing itself for a new bypass, and broadband, mains gas or even a mobile phone signal might not be available in certain villages and hamlets.

Look at local property papers and visit estate agents to find out the asking price for similar properties on the same street, and try to ascertain the maximum potential value. It’s pointless spending £100,000 on improving a property if it will only add £70,000 to the sale price, unless you plan on staying for some time.

Despite the downturn in property prices waterside homes still fetch a premium – with between 25 and 50 per cent added for the view. You may pay more for a seaside home but they are always in demand and will almost certainly hold their value. Property prices are inevitably higher the closer to the water you live and maintenance bills will also be more expensive thanks to the corrosive salt air. Insurance premiums may be more expensive for a seaside home, particularly for those at risk of flooding. Type in the postcode at www.environment-agency.gov.uk to check a building’s status on their flood map.

SPOTTING POTENTIAL

A rundown property may be a bargain if you’re willing to put in the time and money required, but you should be aware from the outset exactly what will need doing, which is where a detailed survey comes in. Find out about local property prices and identify how best to spend your money for maximum effect.

Try to view houses in wet weather, which may show up leaks and damaged gutters, and look for obvious structural defects such as cracks near corners, sagging roof ridges and rotten windows. Always start by securing the basic structure and then move on to the interiors. There’s little point in decorating every room only to find you have a damp problem, a leaking roof or damaged windows. Repairing structural defects and updating services such as plumbing and wiring is usually the most costly part of any renovation project, but is absolutely essential.

GOING LARGE

The key to adding value to an existing home comes in expanding actual space rather than mere cosmetic makeovers. Loft conversions and extensions are the real value-adding winners, but less than a fifth of equity withdrawn from housing is spent on such major home improvements. Much of what is spent goes into updating the internal fabric of the house, on items such as kitchens, bathrooms and general decoration.

As a nation we seem to have become obsessed with the number of bedrooms rather than the overall size of the rooms, but adding an extra bedroom at the expense of living space can be a mistake. Although the number of bedrooms is a key issue, the increase is limited by the overall space available. To further increase the value, more floor area must be added, and simply increasing the number of bedrooms may in some cases actually reduce the value of a property.

For the country as a whole, if a two-bedroom property has a third bedroom added, the value of the house may only increase by about three per cent. In contrast, if this bedroom was added as an extension, approximately 10m2 in size, the value of the house would rise more dramatically, by around eight per cent in total.

Beware badly done extensions however – they are one of the biggest potential money losers – and remember that building an extension can cost almost twice as much per square metre as building a house from scratch, due to the more complicated nature of the work.

GOING UP

Loft conversions can be one of the most cost effective ways of adding value to your home. They cost less than half the price per square metre of a new extension because the basic structure is already in place, and planning permission is therefore not usually required. Not all attics can be easily converted, however, and some can prove expensive to adapt.

Space will also be taken up by the new staircase, so make sure that you are actually gaining more living space overall. Building regulations also require an enclosed means of escape, which may mean adding fire doors to all rooms leading onto the staircase and hallway.

BATHROOMS AND KITCHENS

Selfbuilders tend to blow their budgets on kitchens and bathrooms, partly due to the large number of costly gadgets and gizmos now available for these rooms. It’s important to tailor spending to the overall value of the house and avoid splashing out thousands on a sauna, whirlpool bath and wet-room in a tiny, damp two-bedroom cottage.

An extra bathroom can greatly increase the value of the property. An en suite or a downstairs cloakroom is a good investment, and people still clamour for master bedroom ‘suites’ – with an en suite bathroom and walk-in dressing area seen as the height of luxury.

For two identical properties in the same street, an extra bathroom could add as much as nine per cent to the price, and the more bedrooms a property has, the greater the value that is contributed by a second bathroom: in a two-bedroom house a second bathroom would be less desirable than in a five-bedroom property.

White is still the only real option for sanitaryware, despite what interior designers may try to tell us. Consider buying a basic white suite and then spending a little more on the taps, tiles and accessories for a more luxurious finish.

The same goes for kitchens. It is possible to spend the price of a small house on a bespoke kitchen, but such an investment needs to be carefully considered. If it is in context with the property and affordable within the overall budget then a beautiful, high quality kitchen will add that essential ‘wow’ factor and make your home stand out from the crowd. An expensive, badly fitted kitchen will look cheap and unappealing, though, so make sure that the kitchen fitter is up to scratch.

TRENDS

One fashion which may prove lucrative is the growing trend to recreate the more relaxed and open-plan American-style home, with painted weatherboarding, pretty verandas and shutters reminiscent of New England properties – all of which can be added to existing houses for an instant makeover. For more ambitious renovations, extensions or new build homes, over-sized feature windows are a characteristic of many American house styles, while strong roof lines, dormer windows and heavily protruding gables are also commonly seen.

Avoid strongly themed rooms like the plague. They may seem fun on TV makeover shows, but in reality no-one wants to be lumbered with a Moroccan sitting room or a ‘seaside’ bathroom for too long. It’s very personal, and after the novelty has worn off you will be wishing you’d resisted the urge for porthole windows and a plastic lighthouse toilet roll holder.

Research shows that, despite trends in interior decorating, most buyers prefer natural, earthy colours to bright, bold shades and, although there is a staggering choice of colours available, magnolia is still the top-selling paint.

Think simple, stylish and plain. More and more people are opting for a single colour throughout their house which can then be accessorised with cushions, artwork and flowers to give a more cohesive feel. If you really must have a theme then stick to buying accessories rather than expensive or structural items which will be difficult to replace.

GOING OUTSIDE

A property’s garden, driveway and outbuildings have as much impact on the selling price as its interior. A double garage, rather than a single one, more than doubles the contribution it makes to the value of a property. Again this will vary between different regions: a garage will add more to a property in London than it would in Scotland because of the shortage of space and the price of land.

Think of the garden as another room and design accordingly to reflect the character of the house. Any additional buildings, such as a shed or summerhouse should be carefully considered to ensure they do not detract from the main building by blocking out light and views. Outbuildings can make great selling points if they are well maintained and attractive, but no-one wants a leaky garden shed as a home office.

CUTTING COSTS

There are certain aspects of a build which seem to catch many people unaware. Service connection charges are often overlooked – particularly if you are building on an isolated rural plot. Over-specifying the finishes is another money pit, so avoid including anything which won’t add value to your home.  Kitchens and sanitaryware may be upgraded later – bricks and roof tiles may not, so put your money into the fabric of the house and don’t get carried away specifying luxury items during the course of your renovation or build.

Remember to allow for solicitor and estate agent fees when selling your existing house, as well as moving costs and/or storage for furniture. If your build takes longer than anticipated then the added expense of accommodation (if you’re not living in a caravan on site) can start eating into your funds. If this would create a problem then you should insist on an appropriate penalty clause with the builder if they overrun the expected completion date.

What every house needs is at least one ‘wow’ factor – whether that is a high budget item like a fantastic kitchen or conservatory, or a less expensive option like a contemporary stained glass window or eye-catching fireplace. Not only will people remember your home more easily but such features, if executed sympathetically, can significantly add to its value. It’s all about selling a lifestyle rather than bricks and mortar, which is why developers employ interior designers to come up with alluring show-homes rather than leaving them as empty shells.

Obtain a copy of 431NB (new build) or 431C (conversions) which will give helpful advice on reclaiming the VAT. With only one chance to make a claim it makes sense to wait until the very end of the build and purchase all your materials first. Although some selfbuilders claim early to help them finish off interiors there’s nothing to stop you stockpiling items such as sanitaryware and kitchen units which you can fit later.

Always try to negotiate on building materials. Most builders’ merchants will offer a discounted price for bulk orders. Open accounts with at least two so that you can compare prices and ensure prompt deliveries. Playing one off against another is usually more effective than hoping your loyalty to one company will be repaid, and the credit available will prove useful to cash flow.

If funds are running low, try making a list of features you want to include and place them in order of importance.  Work from the top of the list, differentiating between needs and wants, as far down as you can afford to go. Keep detailed financial records and receipts (VAT receipts will show a registration number) until the bitter end.  Not only will you need these in order to reclaim the VAT from HM Revenue and Customs, but they will highlight exactly how well you are sticking to your budget and prove an interesting souvenir once the build is over.