Where is the Greatest Return on Kitchen and Bathroom Renos?

Wednesday, May 6th, 2015
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As the popularity of reality television programs throughout Australia has grown, so too has interest in undertaking renovation projects, not just to improve living spaces for occupants but also to add value to a home prior to sale.

While overall levels of renovations activity are quiet at the moment, there is reason to believe that may change in the near future, especially where kitchens and bathrooms are concerned. A recent report from the Housing Industry Association, for instance, suggested that the number of houses throughout Australia within the 11-to-20-year age bracket – the age at which around three quarters of major kitchen and bathroom renovation jobs typically take place – is expected to grow by around 50,000 between now and 2018.

That raises questions as to how residential property owners can maximise their return on investment when undertaking such renovations. In this regard, leading real-estate agents point to a number of key themes.

First, it is critical to think carefully about why you are renovating, the type of people that are likely to buy or rent your house, and how you are going to earn a return on investment.

Anna Thomas, chief operating officer of Stockdale & Lego said it is crucial to understand the local demographic as well as the cultures of those who may be look to buy similar types of properties within your area.

“You need to look at the demographics in your area who are maybe going to rent a property or who is actually going to come in in the sense of purchasing your property,” Thomas said.

“Often people forget to take into consideration different cultures. Some cultures, for example might like dual cooking facilities. Some actually may prefer gas versus induction. Some kitchens need to look at extraction fans, some cultures like to have a kitchen outside as well.”

“Those are some of the things that people actually forget to look at when you are doing these renovations.”

Also important is the purpose of the renovation. An entire new kitchen or kitchen makeover, Ray White New Farm principal Haesley Cush said, may be a good bet close to the sale of the home but may be less suitable for investment property owners seeking to hold their asset for a considerable period. He noted that in the latter case, any incremental value in terms of higher rental returns may not be sufficient to justify the investment involved. In such situations, he said, superficial renovations involving basic appliances, lighting improvements or new benchtops may be a better bet. Alternatively, conversion of any excess laundry space into a second bathroom may make the property more attractive to multiple-occupant tenants, who are typically higher paying when compared with their single counterparts.

It is also important to look carefully at return on investment. Unless you were confident a $10,000 makeover was going to deliver at least double that amount in value appreciation of the property, Thomas said, it would be better to go with cosmetics changes in terms of handles, benchtops, cupboard or lighting – especially those which create the illusion of more space.

When doing the job, key considerations include cleanliness, functionality and space – especially bench and storage space. As areas of personal hygiene and food preparation, kitchens and bathrooms are areas of high sensitivity to owners as well as being some of the most frequently used areas of the property. Ample bench and storage space allows greater ease and comfort during food preparation and allows prospective buyers to keep these areas clean and tidy with relative ease. Space in kitchen and dining areas also allows buyers greater flexibility in terms of the furniture they choose to bring in, Cush points out. Meanwhile, Thomas stresses that ‘storage sells.’

Also important are neutral colours such as white and some of the lighter sandstones. These not only promote a warm and clean feeling, but they allow buyers the flexibility to add colour of their own (through decor and items such as towels, for instance), and therefore appeal to a wider variety of buyers. In contrast, Cush has seen examples of brown and grey colours used on benchtops which looked ‘dirty’ and detracted from prospective buyer impressions.

In terms of professional help, both Thomas and Cush stressed that advice from architects or interior designers is worthwhile. While trade shows and magazines have their uses, Thomas cautioned against going with trends that may not last. Should a magazine say gold taps are in, ‘that doesn’t mean they will be in in two years’ time,’ she said.

Finally, Cush said the effect of new or newly renovated kitchens or bathrooms cannot be understated in terms of the sale value of a home, especially as these are among the most expensive areas to renovate and also the first areas on which new home owners look to spend money – an outlay which will be saved if these are new or newly renovated.

“Step one in doing work on a property is doing a kitchen.” Cush said.

“Renovating a kitchen is going to immediately add some value to the property because you can say you’ve got a new kitchen and newly renovated bathroom.”

“That opens up the market to more buyers.”

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