Renovations beat the recession

Builders used to joke about million-dollar-plus renovations, but the trend is now well established in wealthy suburbs as home-owners opt to upgrade rather than buy a new home. Photo / Supplied

Many homeowners in top suburbs are settling for million-dollar renovations instead of buying new houses in the economic downturn.

Statistics New Zealand figures this week show the value of building consents for houses and apartments slumped by 36 per cent from $6.1 billion to $3.9 billion in the year to May.

But the value of consents for additions and alterations has virtually held steady at just over $1 billion as home owners switch to new kitchens, bathrooms and extensions instead.

Certified Builders Association president Derek Baxter said the renovation boom was partly compensating for the collapse in new building work over the past two years.

"There's been a dramatic shift from new house construction to additions and alterations and a lot of change to smaller work that a couple of years ago you just couldn't get a builder to do."

Mr Baxter, whose association represents about 1500 mainly smaller building firms, said the number of consents had fallen but the average value of the work was higher.

"The high-end renovations and alterations market has held up particularly well."

He said builders used to joke about million-dollar-plus renovations, thinking a home owner would be better off demolishing the property and starting again.

But the trend was now well established in wealthy suburbs of the main centres - Remuera and Herne Bay in Auckland, Roseneath in Wellington and Fendalton in Christchurch.

If owners bought the house five years ago or more its value would still be substantially higher than the price they paid, giving them confidence to spend without fear of overcapitalising.

Trends magazine business development manager Adrian Law said many wealthier home owners were willing to spend at least $1 million to buy a home and then another $1 million or more converting it from top to bottom.

He knew of a Grey Lynn house where this had recently occurred and of a chief executive of a major company who spent a similar amount redesigning an older house.

Mr Law said people in top suburbs such as Remuera and St Heliers often did not want to move as they liked the areas, the school zones and being close to the city.

Many were prepared to spend up to $100,000 on a home theatre system or pay extra for imported granite and marble from Italy or Spain.

"It's nothing for our home owners to spend a couple of hundred thousand dollars on a kitchen."

Eastern suburbs builder and CBA director Dave Brown said he still had plenty of work but it was usually on smaller projects such as kitchens and bathrooms. A few years ago many jobs were worth $150,000 or more.

A typical job for him these days was $30,000 to $50,000 but these had advantages, especially as there were fewer worries about being paid.

"It's good for us because the people we work for generally have the money in the bank or they add it on to their mortgage. It's not a big hassle for them."

THINKING BIG

Kay is about three-quarters of the way through a year-long renovation of her 1950s brick-and-tile house.

She and her husband are gutting every room except one in the double-storey Green Lane house to improve the flow between rooms and open the house at the front and back.

As well as rewiring throughout and regibbing to straighten the walls, they have built a garage with an upstairs studio, created an entertainment room and opened the kitchen into the living room.

"We have a beautiful site and we want to live here for as long as we can. The people before us lived here for 50 years."

Kay, who did not want to use her full name or address, is reluctant to talk about exact costs but admits the only way to justify the cost is to take a long-term view.

"When everybody renovates, they over-capitalise. You have to look at how long you want to stay there.

"Yes, we could have pulled the house down, but I didn't feel that was the right thing to do.

"I probably could have had a completely new ultra-modern design, but I don't know - I think I like what I've got."

She points out that it can easily cost $1 million to build a new house, although she believes controlling costs is important.

"It's very easy to get caught up and say, 'Yes, do that, do that, here's another $10,000, here's another $20,000, here's another $50,000, here's another $100,000'.

"And then you suddenly think, 'Jeepers creepers!'

"You've really got to keep your finger on the pulse."

So is she still convinced she's doing the right thing?

"I think so. I'll be really pleased when it's over, though."

THINKING BUDGET

Don Edwards is working fulltime to renovate his home in Halsey Drive, Lynfield - but it's not exactly by choice.

The 49-year-old marketing manager decided to do the job himself last year and started working weekends in February.

Then his company, Regency Duty Free, lost its contract at Auckland Airport. Since his final day at work on Tuesday, Mr Edwards has been brushing up on his CV and getting stuck into some painting.

He calculates that doing the work himself will cost him between $20,000 and $30,000 - a big saving on the $110,000 estimate he got from builders.

Assuming he can soon find a job and go back to renovating at weekends, it will take him another two to three months to double the number of bedrooms from two to four, create

a second bathroom and update the 1970s decor throughout the house.

Mr Edwards says he briefly considered buying a new house but cannot afford it.

His duplex townhouse, made of concrete block and 1970s cladding,

is valued in the low $400,000s but buying a comparable new house in the area with similar views would cost at least $600,000.

"To buy in this area where we've got a view of the water - out the back door you see the Sky Tower, out the front you see the Manukau Harbour - it's not possible.

"It's $400,000 for a section."

THE GOOD NEWS

Housing figures due out on Monday are expected to show a slight rise, and Auckland's largest real estate agency is talking of a "golden autumn".

Barfoot & Thompson sold 861 properties last month, up 55 per cent on sales in June last year.

Prices are still suffering, and have dropped from $533,909 in May to $521,791 last month.

But Barfoot director Peter Thompson is focusing on the increase in number of sales, rather than on prices.

He said Auckland's housing market had made a remarkable recovery and no one had forecast the speed, strength and solidity of activity.

QV's national house price figures are due out on Monday and this year they have shown less of a drop lately. That trend could continue in the next set of figures.

Yesterday, QV issued its quarterly housing market survey, showing fewer people expect house prices to fall much further.

More intend to buy in the next year and fewer expect to sell.

Most believed the worst of the price declines was now over but the housing market was still over-priced.

- Anne Gibson