Do careful sums before adding to your home
Building on a flat or adding a cottage to an existing home has become an increasingly popular idea in recent times, as many families look to reduce living costs by housing more than one generation on the same property, or raise their incomes by taking in tenants.
However, says Martin Schultheiss, CEO of Harcourts Africa, homeowners should be very wary at the moment of overcapitalising, or pushing up the amount spent on a property beyond its sale value.
“As things stand, the banks are extremely wary of financing property additions and alterations, so homeowners who would have to extend an existing bond to pay for such a project will most likely be prevented from making this mistake.
“However, those who decide to put cash into a home addition are at risk because, given the fact that home values generally have declined over the past year, they may not be able to recoup that expenditure on resale of the property.”
Consequently, he says, homeowners should consult a reputable and experienced local agent about home values in their area before making any final decision. “If your home’s current value is below the average for your area, it may be worth spending the money to build on and make your home more attractive to potential buyers – especially if the addition is space that you can rent out for additional monthly income.
“But if your home is already valued at the average for your area or more, you should only spend more money on it if you are planning to live there at least another five years – or perhaps if you really need to accommodate an ageing parent.
“It is going to take time for home values to regain the past year’s losses and begin the upwards movement to levels that would enable you to recoup what you will spend now on a granny flat or cottage.”
In addition, says Schultheiss, there is the question of whether your local authority will even allow you to extend your home or create a second dwelling on the same stand. “And again, a good agent will be able to tell you about the subdivision and rezoning policies for your area, and the approximate costs involved.
“At which stage, you may just find that you would be better off selling your existing home and putting your cash towards the purchase of a new one which already has the additional space you want - and which will gain proportionately more value as the market improves.”
ISSUED BY HARCOURTS