The numbers are in for 2018 and the home renovation market shift is here again.
Every year I eagerly await the cost vs. value report put out by Remodeling Magazine and even though this report is an American study, the national averages are an excellent indicator of what is happening in the Canadian marketplace.
Big surprises this year are the continued trend downwards of kitchen and bathroom renovations. For years, homeowners looking to sell for top dollar would invest in mid-level kitchen and bathroom makeovers to prep their homes for the housing market.
According to the numbers for 2018, these renovations have dropped when it comes to their return on investment (ROI). This ROI is determined by the amount of money spent on the renovation and the perceived market increase of the home’s value.
Diminishing returns
Basically, if you spend $15,000 on a kitchen upgrade, you can expect to get back an average of 81.1% (or $12,150) if you sell within five years of the renovation. This number drops drastically as the budget gets higher. A major renovation of more than $125,000 will get you a return of only $63,750. Bathrooms are coming in a little higher with an average return of 70.1%.
So why the shift in values?
A lot of it has to do with the buyers and, specifically, the millennials who now represent 35% of the housing market, according to realtor.com.
Many millennials are just as happy with a finished home as they are with one that needs to be completely gutted and remodeled. We are seeing an increase in do-it-yourself and how-to videos on home renovations, painting kitchen cabinets and even simple things like hanging wallpaper.
What to renovate
However, there are some excellent spots to spend your renovation dollars.
Adding a deck continues to grow in value, up to an 82.8% return on the investment. Many experts (myself included) have speculated that these deck additions are seen as extra living space by a buying demographic that has to settle for less square footage in the home due to rising house prices. Basically, if the buyer can’t afford a huge home, they are accepting a wood deck on the back as a summer option for living space.
In recent years, new products including pressure-treated woods that come ready to buy in a rich brown tone have made tackling outdoor projects easier and more cost-effective than ever before.
Also big for ROI in home renovations are windows and doors. With an ROI of over 98%, these fixtures have a fantastic return. Buyers consider windows and doors to be a great indicator of the so-called “bones” of a home and value them accordingly. Personally, I think the idea of putting in new windows or doors intimidates more first-time homeowners, so having the job already done for them is very appealing.
Wherever you choose to remodel this year, spend your money wisely by including some renovations that increase the value of your home.
Related
Renovation spending in Canada still trending up
