The Appraisal Institute of Canada offers an online guide which helps homeowners calculate the average return on their investment in a renovation project.
Choose “bathroom renovation” and plug in an outlay of, for example, $30,000 into the calculator and RENOVA niftily tallies a 75- to 100-per-cent return, which translates to an added $22,500 to $30,000 on the resale value of your home. Kitchens also rank well up the list with a similar 75 to 100 per cent payback.
Swimming pools, home theatre rooms and interlocking brick driveways yield only 25 to 50 per cent. The payback for installing central air conditioning ranges widely, from 25 to 75 per cent. Putting in a skylight may turn out to be a waste of cash, with the estimated return varying from zilch to 25 per cent at the most.
Builder Doug Campbell of DC Construction Ltd. believes the hectic pace of the real estate market in the Toronto area this spring is also driving the reno business. He has been on a stream of visits with real estate agents and potential purchasers who ask him to look over houses before an offer even goes in. How much will it cost to replace that antiquated knob and tube wiring, they wonder, or add a family room with a master suite above?
“When there’s a lot of turnover and people are buying, they always want to do work.”
Mr. Campbell’s rule of thumb, when owners ask for his advice, is that about 75 per cent of the money spent on a substantial reno will boost the home’s value. The other 25 per cent is an investment in the intangible – warm floors underfoot, extra counter space or a view to the garden.
He asks new clients about their plans for the next five to 10 years, because that will determine where they should invest the most cash.
If clients plan to sell again within a few years, Mr. Campbell recommends that they hold costs down on five-star items such as satin-polished nickel faucets where a more economical choice will do.
“A set of taps for a bathroom can cost $500 or it can cost $2,000. Nobody would appreciate that extra $1,500.”
Homeowners have become much more energy-conscious in recent years, he finds, so people often call on him to bulk up the insulation. Eco-friendly features such as tankless water heaters are increasingly popular.
In Vancouver, ReMax broker David Campbell says the market for townhouses and condos has started to slow after a stretch of torrid sales. But a lack of inventory means that potential buyers are competing for single-family houses in the more popular neighbourhoods.
If people have a solid income, they will pay a rich price for the coveted single-family house that is move-in ready. “They’re paying a premium if it was done with city permits.”
Nineteen times out of 20, he says, it’s cheaper to tear down a tiny bungalow than to build an addition, raise the roof or finish the basement. But many older houses need updating.
Mr. Campbell counsels homeowners who are preparing a house for sale to look at each room in the context of the entire property. He recently evaluated one house where the owner had invested in lovely landscaping and fresh decor. He was startled to walk into an overwhelmingly blue bathroom that seemed to belong to another era.
“If you go and change one thing, you’re going to make other things look dated by doing that. You’ve got to look at the rest of the package.”
He urged the homeowner to update the bathroom because, in Mr. Campbell’s opinion, that reno is a fast and inexpensive way to make a house more appealing, whereas installing a kitchen for a quick turnover does not pay off.
“With the cost and time of putting one in, you’ll miss the spring market.”
Calgary-based interior designer Monica Stevens says the uncertainty surrounding the housing market in that city is bolstering the renovation business.
If you go and change one thing, you’re going to make other things look dated by doing that. You’ve got to look at the rest of the package. — Broker David Campbell
Some homeowners have watched the value of their properties fall from the lofty levels of recent years, so they have decided not to settle in for the long term and create a house they love. Others are taking advantage of a cooler market and buying a second house without even attempting to sell the first.
“Both groups are capitalizing,” said Ms. Stevens from San Francisco, where she was accompanying a client on a shopping excursion.
Ms. Stevens says kitchens and bathrooms are still the rooms most often chosen for renewal, but she is seeing a move away from one large, combined kitchen and family room back toward more delineated space.
Many people who tried cocooning with the whole family in a great room are now clamouring for some space of their own, which illustrates another caveat: It can be unwise to follow a reno trend just because all of the neighbours are doing it.
When the economic downturn hit Calgary, Ms. Stevens says, trades became more available, and homeowners have become immersed in new projects. Among her clientele, many are splurging on luxurious fixtures and finishes.
“Once they get going on a renovation they make a full commitment,” Ms. Stevens says. When the walls are torn open, the house is filled with drywall dust and the family is living in a rental apartment around the corner, clients want to be rewarded with a beautiful house at the finish.
“You’re only going to do it once.”