Marlborough Property Investors' Association

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Simple steps to increase your home's value


During the property market's heated phase, home owners saw the value of their houses soar without having to do so much as lift a paintbrush - but the sands have shifted.

Even long time property investor Olly Newland is surprised at the "rapidity and violence" of the burst property bubble.

Damage has so far been worst for developers and high-end properties, where he has seen 50 per cent losses.

But with house prices still falling in the short term, ordinary owners' and buyers' home equity will also be eroded for a while, says ASB chief economist Nick Tuffley. The end of a property boom is not the time to be highly geared, says Kieran Trass, author of The Property Cycle. Low equity is lost quickly in a falling market.

Having negative equity doesn't matter if you can pay the mortgage bill. But if your circumstances change and you are forced to sell then it becomes a personal tragedy.

Tuffley advises home buyers to leave a buffer in their budget to allow for the risk of higher debt servicing costs and unexpected developments.

Newland says the only guaranteed capital growth comes from buying under market valuation at the outset. But a good way to shore up your home's value in the falling market is to get your hands dirty and add value the old fashioned way: with cost effective renovations.

Newland's rule of thumb is get a $3 return for every dollar he puts in.

You can calculate this by getting a property valued as it is, together with an estimate of how much the value will increase by when the planned renovations are complete.

As well as creating capital gain when the market has stopped doing it for you, strategically enhancing your home now means it will be in prime position to go on the market if you decide to sell and want to get the best price possible. Buyers have now ramped up their due diligence, getting building and council reports, says Chris Eves, Lincoln University's property studies professor. If they find anything wrong with a property, they will use it to reduce the price.