Why is it that a marble benchtop adds thousands of dollars to a home's value but top-end double glazing may not increase its valuation at all?
My first winters in Whanganui were spent renting an icebox that defied heating. The neighbouring unit was built in the same style and suffered the same issues. In between tenancies, the landlord spent significant sums to improve energy efficiency and comfort.
Among other things, full height, south-facing windows in a living area were replaced with top-end double glazing. That change alone would make a big difference to the cost of heating the space, and the future occupants' comfort and health.
Did that increase the property's value, as assessed by a qualified valuer? No, it did not.
When I took this up this example with Diana Davey, chairwoman of the Property Institute of New Zealand, Whanganui, she reminded me of the valuer's maxim: Cost doesn't always equal value.
I understand the danger of over-capitalisation, especially spending lots of money on out-of-the-ordinary renovations that suit your tastes but are unlikely to appeal to future prospective buyers (imagine a huge apiary, or floor to ceiling wall murals in every room).
Some buyers, she pointed out, would value the character of a high-end villa with original wooden joinery and lead light windows more than they would a modern home with double-glazing.
Valuers can use a range of methods to arrive at a figure — it is not an exact science and professional judgement always comes into play, Diana acknowledges. Valuers most commonly use a "market approach" and so they can argue that their valuations reflect what buyers are prepared to pay more for.
In a small market like Whanganui, it can be hard to find enough recent sales for decent comparison. However, the current buoyant market means more sales data available, which in theory should lead to more accurate valuations.
Conversely, Diana warns that in an active market with multiple buyers competing for homes, these [hidden] features may not equate to a difference in value.
As for why that is, I wonder if it's because all boats lift on a rising tide. In January, Property Brokers residential properties in Whanganui were listed, on average, a full third over their registered value (RV). But tellingly, even poor quality houses were still being listed at up to 25 per cent over RV, according to Philip Kubiak, Property Brokers Whanganui branch manager.
I started out thinking the valuation industry was at fault for not fairly valuing better functioning houses but I'm concluding it's a much wider problem.
Real estate agents could more consistently highlight superior hidden features and explain the benefits, such as lower heating bills, more comfort and a healthier environment. (Just recently I viewed a unit for sale where the property flier listed insulation as "unknown". Really?)
Most of all, it might come down to us, home buyers and dwellers. Is a marble benchtop in the kitchen more important than spending the same money on better insulation or ventilation? Is this year's design fad (is it still outdoor rooms?) the best use of money that could be used for, say, solar panels or a rainwater tank?
Eventually, we might reach a point where the space around a detached house is valued not for amenity or privacy as much as its potential to grow veges and fruit trees. Or where proximity to town is prized because it makes it possible to do without a car. We'll see ...
In the current sales environment, the marble benchtop may increase the value of your home more and that matters if you're intending to sell soon. But for owner-occupiers planning on staying put, what value do you put on your own wellbeing and that of your family?
*Rachel Rose is a Whanganui-based writer with a particular interest in building science. More information, plus sources, can be found at www.facebook.com/rachelrose.writer
