Rising home prices may have limited existing homeowners' abilities to trade up their real estate -- but a new survey finds renovating one's existing abode may hold the answer to maximizing every last bit of their equity when selling.
According to a Royal LePage survey of its own brokers, upgrading a home's main spaces can boost its value by double-digit percentages: bathroom renovations can increase a home’s value by as much as 16%, while finished basements can add roughly 15%. Meanwhile, a nicely landscaped outdoor entertainment spaces enhance the home’s valuation by 10%.
Kitchen Renos are King
Kitchen renovations add the most value, though; according to the survey, they potentially increase a home’s sale price by as much as 20%. Being the most frequently used room in the house, and generally regarded as a gathering place, the survey describes the kitchen as the heart of a home. Moreover, when potential buyers walk through a home, the kitchen is typically the first room they scrutinize, and it will influence their decision on whether or not to purchase more than the bedrooms will.
“A kitchen is perceived as the gathering place and the heart of the home,” said Mike Heddle, broker and team leader, Royal LePage State Realty. “When a potential buyer views a home for the first time, the one thing that will stand out -- for better or worse -- is what the kitchen looked and felt like. They may not remember the size of the bedrooms or the colour of the walls, but they will remember the kitchen.”
Following kitchens and bathrooms, the survey ranked finished basements as the third most-worthwhile renovation, especially if it contains an apartment. Not only can rental income be derived from the basement unit go towards mortgage payments, the unit is also attractive for multigenerational households and will, therefore, give the house broader appeal on the resale market.
Survey respondents also reported that window replacements can enhance a home’s value by an average of 13%, while interior paint jobs provide, on average, a 12% boost.
Lockdowns Led to Home Improvement Surge
The COVID-19 pandemic was the catalyst for record household savings, with lockdowns precluding any chance for major non-essential outlays like travel or entertainment. The Bank of Canada also slashed its benchmark rate to a paltry 25 basis points, a record low that Canadian borrowers took full advantage of. While some decided to renovate their homes because they were priced out of a rapidly heating housing market, others saw an opportunity to upgrade their surroundings, especially as they began spending more time at home.
“During the pandemic, many Canadian homeowners used built-up savings to make improvements to their homes," says Heddle. "Whether it’s a new kitchen or upgrading your outdoor space, home renovations are a worthwhile investment, as you and your family will enjoy the new space, in addition to the potential increase to the overall property value.”
Exterior project renovations were also quite popular in the wake of the pandemic, with summer right around the corner. However, while landscaping and adding a deck can reap the benefits, investing in a pool will not yield great returns, the survey noted, as they boost a home’s value by an average of just 6%.
The Value of Turnkey
Ultimately, buyers will be most-drawn to homes that are move-in ready; 87% of brokers surveyed recommend interior home renovations because turnkey properties sell faster.
“Properties that are turnkey with modern finishes spend less time on the market,” said Heddle. “However, the timeframe and logistics for delivery of goods and materials may be a deterrent for many sellers, especially with the rising costs associated with renovation projects.”
Still, the pandemic caused supply chain headaches and caused the cost of materials to surge. Additionally, contractors have been so busy that elongated timelines have become the rule, not the exception -- although there’s scarcely any reason to believe things won’t return to normal.
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