As the government looks at making home improvements easier, new research by GE Money Home Lending shows that when it comes to making more of newly acquired home improvement funds, consumers should forget about “changing” rooms. To get the best return for their money they need to add rooms.
Research shows that four out of 10 homeowners considering drawing down equity as a secured loan or remortgage do so with the express intention of improving the value of their home. Not surprising in the current climate of rising house prices, increasing interest rates and the overall cost associated with moving home.
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Other factors such as longevity, the pension gap and the difficulties younger people face getting on the property ladder, mean that existing homeowners see their homes as being part of their retirement planning and the home is often perceived as an extended family home for a longer period of time. Therefore, homeowners are increasingly turning to property development to increase the value and space of their current home.
As we approach the summer many consumers are looking to start DIY projects – and we as providers and brokers see more requests for additional loans for this very purpose.
Indeed recent research by Moneysupermarket.com shows that almost two in five (45per cent) people believe that home improvements are mainly undertaken in order to increase the value of a home.
So are we as consumers getting savvier? Do we even need advice when it comes to growing our net worth in this way or are we simply taking the initiative and doing it on our own terms? GE Money Home Lending decided to put this to the test with some research investigating which home improvements consumers believe would increase the value of their property the most and then we asked the experts for their advice.
Perception – the consumer’s view
GE Money Home Lending research shows that the majority of homeowners believe that the best thing they could do with newly acquired home improvement funds to most increase the value of their home is to fit a new kitchen. In addition to this, bathrooms and general redecoration are the main perceived value adders when it comes to improving the value of their property after costs.
This could not be further from the truth. Ironically, it seems that homeowners keen to increase the value of their property often undertake the wrong home improvements. In fact the top three modifications homeowners opted for – combined – would not increase the value of a home by as much as an estate agent’s top choice – a loft conversion.
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Bizarrely, when asked what improvements after costs would add most value to a property only a third opted for adding a loft room – despite the obvious benefits in space and saleability.
Adding a room to a property – for example by renovating a built in garage – has many practical benefits to the average homeowner. It can become a room for extra storage, a secret den for rest and relaxation or even as a room to rent out or to house older relatives as an alternative to nursing homes and social care. Installing a new kitchen or bathroom or redecorating a property is often a cosmetic development – and one which generally involves personal preference and tastes. This can be problematic when it comes to a future sale – as one homeowner’s treasured flock wallpaper is another’s nightmare.
The benefits of adding an additional room are particularly beneficial to those homeowners who live in the more metropolitan and densely populated areas of the country, such as London. In these areas where space is often a privilege, not only can an extra room increase the value of the property but it also creates the often much needed extra space.
Reality – the estate agent’s view
Whilst consumers head to the kitchen and bathroom to add value, the professional have a different view. Estate agents firmly believe that in order to increase the value of a property – regardless of region – homeowners need to look at creating extra space by expanding the property through a loft conversion, an extension or a conservatory.
By listening to estate agents, the average UK home owner could improve the value of their property by up to £22,000 (depending upon what type of extension they undertake), compared to average £8,000 for a new kitchen or a mere £5,000 for a new bathroom.
When asked, estate agents put loft conversions ahead of all other home improvements across the board; however, the value this adds to a property obviously depends upon the type of property and the region in which it is located. A quarter of estate agents surveyed estimated that adding a loft conversion could increase the average house price by more than £25,000, particularly in areas such as London, East Anglia and the South West. London shines above all other areas with lofts adding a breathtaking £45,000 on average.
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Furthermore, whilst for homeowners outdoor space is seen as a place of relaxation, tranquillity and a place to socialise with friends over a summer BBQ, estate agents believe developments to outdoor space add little value to the overall price of the house. On average, adding decking to the garden or resurfacing a bumpy driveway adds just over £3,000 to the value of the property and both come bottom of the estate agents list of home improvement recommendations.
Homeowners’ DIY projects – more paint than profit
Homeowners:
Top 10 value adding improvements Estate Agents:
Recommended top 10 Average £s added
1) New kitchen 1) Loft conversion £22,300
2) New bathroom 2) Add an extension £19,271
3) Redecorate 3) Build a conservatory £11,904
4) Add an extension 4) New kitchen £8,250
5) Build a conservatory 5) Add central heating £6,147
6) Loft conversion 6) Windows £5,239
7) New windows 7) New bathroom £5,155
8) Add central heating 8) Redecorate £4,576
9) Add solar panelling 9) Resurface the driveway £3,928
10) Resurface the driveway 10) Add decking to the garden £3,617
Source: GE Money Home Lending
Changing rules
Looking ahead, home improvements could be made easier in the future as a result of a new Planning White Paper, being put before government. It is being hailed as the most thorough overhaul of the planning system in decades and looks set to spur development and home improvements by ripping up red tape.
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Under the proposed changes, homeowners could face an easier time making green improvements such as adding roof-top wind turbines and solar panels. It should also make minor developments, such as conservatories, easier as homeowners would no longer need permission for improvement where there is little impact on neighbours.
However, the White Paper is still in parliamentary discussions
and whether these will be implemented remains to be seen. The proposals are now being consulted on over the summer before going through Parliament during the next session starting in September. In the meantime, homeowners need to evaluate what are the most important and practical home improvements to be made and understand the impact of these upon the value of home.
With the DIY season upon us, home improvements are now in full swing. It is important that any home improvements are planned thoroughly. Homeowners needs to research any major projects, including seeking professional advice before going ahead with their plans. In addition we as an industry need to advise on the most appropriate vehicle to finance these works – be it a remortgage, a secured loan or a home improvements loan.
The key thing this piece of research has thrown up is that consumers overwhelmingly still need guidance from the experts. One very encouraging fact that emerged from the research is that 30 per cent those considering financing some form of home improvement claim that they would seek advice on that loan from a broker or IFA.
Next month: New GE Money Home Lending research assesses which markets are hot with consumers considering buying abroad – and do the experts agree?
