Contact Us
Wednesday Mar 23, 2016

'Avoid improving your property beyond its realistic resale value'

Home owners planning on renovating and extending their properties today face a greater risk of overcapitalisation than ever before according to Ronald Ennik of Ennik Estates an affiliate in Gauteng of Christie's International Real Estate.

"The reasons for this are twofold.

"First, there has been an unprecedented rapid pace of change in automation technology, style and design in recent years.

"So much so, that the shelf life of new fixtures and fittings has never been shorter.

"In the past, if you overcapitalised on a house, you generally wouldn't wait more than five years for value to catch up. Furthermore, it took up to 10 years before homes began to become technologically outmoded.

"Nowadays, however, it can take just two years for contemporary technology features and design elements to lose their appeal to buyers," says Ennik.

"Second, overcapitalisation has always bitten hardest in a declining residential property market such as we are now experiencing in SA as a result of a faltering economy and unsettled socio-political landscape.

"At worst, the combination of these factors could prevent a full redemption of the capital outlay on a home upgrade - particularly if it pushes the property beyond the ceiling price in its suburb.

"My best advice to buyers is to avoid improving a house beyond its realistic resale value in these circumstances.

"Also, make sure your renovation is tailored to suit the neighbourhood.

"Most residential suburbs have average and top-price thresholds beyond which sales are achievable only in exceptional circumstances," he says.

"Too much upgrade investment in the wrong suburb will be difficult, if not impossible, to recoup - so check average home prices in the area before you spend a cent.

"In normal conditions the rule is not to invest more than 25 percent of market value of a home on improvements and renovations. In the current market, more prudence is probably warranted.

"Care should be taken about overly-costly use of the three Fs - fittings, fixtures and finishes - as well as buying too heavily into the fast-moving trends in technology and design," says Ennik.


Weekend Argus (Sunday Edition)




Property Searches:

RSS Feeds

Browse Property For Sale

© 2020 Independent Online Property Joint Venture (Pty) Ltd. All rights reserved.
Reliance on any information this site contains is at your own risk. Please read our Terms and Conditions of Use and Privacy Policy.