It would be fair to say that although the property market has rallied somewhat, it still has a long way to go before it could be described as ‘healthy’ once more. Despite this, property remains a good investment and it pays to maintain and even refurbish your property if necessary, failing which you stand to lose out when you decide to sell your property. So says a Cape Town based real estate agent.
A property scenario the agent came across recently lends credence to these comments. The agent was approached by a property owner in Wynberg, Cape Town who wanted the agent to facilitate the possible purchase of a neighbouring property in the area he was living in. The owner was interested in the property as he wanted to expand his consulting premises by breaking through to the neighbouring property.
The owner had purchased his property- which was built in 1928 - in 2006 for R800 000 and had since carried out extensive renovations which included overhauling the bathrooms and the addition of an en-suite courtyard, a lapa and a pool. Quality fittings such as granite kitchen counter tops were also added and walls were knocked down inside the house to create fresh, open plan spaces. Following a Comparative Market Analysis (CMA), the property was estimated to be worth approximately R2, 673, 000.
At the owner’s request, the agent approached the neighbouring property’s owner who agreed to have a CMA performed on his property. The property was built in the same year as the neighbouring property and was practically identical in terms of the layout and size. However, unlike the other owner, this property’s owner had not upgraded or maintained his property during the 29 years he had owned it and it was badly in need of remodelling. Post CMA, the property was estimated to be worth only R1, 4 million - over R1, 2 million less than its twin property next door.
From this scenario it’s clear that it pays to keep a property up to date and in good condition. If the owner of the neglected property had upgraded and maintained his house years earlier, it would have achieved a far better valuation. Unfortunately, upon noting the value of his neighbour’s property, the owner of the rundown property pushed up his asking price to R2 million which of course was completely unrealistic. Needless to say the deal fell through.
The agent explains that the owner of the rundown property perpetuated behaviour which continues to play out across the property spectrum. This behaviour, coupled with the fact that few properties - even those in good condition - are achieving their full asking price and the fact that buyers don’t want to spend money fixing up a neglected property means that sellers such as the owner of the rundown property simply lose out on a sale, all of which underscores the importance of keeping your property in good condition.
In addition to giving your property a competitive edge, there are a number of other reasons why you should keep your house in a good state of repair. These include reducing health and safety risks, saving money through utilising energy efficient materials and fittings and extending the life of house and equipment components.
Of course having outlined the importance of maintaining and renovating your home, it must be pointed out that it’s also important not to go overboard and over-capitalise on a property. Owners should first ascertain what the average price is in their area and invest accordingly. Over-capitalising can prove just as risky as not keeping a property in good condition and it’s important to try and strike the right balance between giving a property the edge - which can be achieved via a variety of affordable methods - and spending too much money on an asset that doesn’t warrant it.
