How Renovations Affect the Value of Your House (Part 1)

Contrary to what some HGTV shows would have you believe, you don’t always increase the the value of your house proportionately to how much you spend renovating. Put in a $60,000 kitchen? Sorry, but your house didn’t just go up by $60,000.Buy a new tap at IKEA for the kitchen? You didn’t just add $139 of value to your house.

In fact most renovations won’t give you the ROI or payback that you probably expect. A recovery rate is essentially the percentage of the cost of a renovation that you can generally expect to get back in the resale price of your home (so a 50% recovery rate on a $20,000 renovation would mean you could expect a $10,000 increase in the value of your house). According to the Appraisal Institute of Canada, most home owners can expect the following recovery rates on their renovations:

Kitchen renovation: 75% to 100%
Bathroom upgrade: 75% to 100%
Interior painting: 50% to 100%
Roof replacement: 50% to 80%
New furnace or heating system: 50% to 80%
Expansion (addition of family room): 50% to 75%
Doors and windows: 50% to 75%
New Deck: 50% to 75%
Installation of hardwood floors: 50% to 75%
Construction of a garage: 50% to 75%
Fireplace (wood or gas) 50% to 75%
Central air conditioning: 50% to 75%
Finished basement: 50% to 75%
Wood fence: 25% to 50%
Interlocking paving stones on driveway: 25% to 50%
Landscaping: 25% to 50%
Asphalt driveway: 20% to 50%
Pool: 10% to 40% (ouch)
Skylights: 0% to 25%

Of course how much increase in home value you can expect from your renovation depends on a lot of things, including:

• Your starting point (i.e. what your kitchen looked like before the renovation)
• The quality of the renovation (your DIY knob and tube electrical replacement isn’t worth the same as wiring replaced by a certified electrician)
• The appeal of the renovation project to the average buyer (that extra 3 feet of kitchen space in your condo may seem extremely important to you, but an average buyer may not even notice it, let alone compensate you for spending $15,000 moving the cabinetry and drains)
• Whether or not your style appeals to the average buyer (not everyone likes black paint in the living room or wants a built-in hot tub on the deck)
• How the renovation works with the rest of the house (a $60,000 kitchen can be great, but if the rest of the house is circa 1980, your house will appeal to fewer buyers and the impact of your kitchen will be smaller)
• What the neighbours are doing (it’s hard to be the most expensive house on the street no matter how nice your renos are)

So why should you renovate? What should you be care careful of? Tune in to our next blog for our thoughts on: To Renovate or To Not Renovate?

(Oh and if you’re considering renovating your house because you’re hoping to get a higher price when you sell, get in touch. We’d be happy to come over and give you our opinion on how the projects you’re considering will affect the value of your house.)